What is reported on Schedule K-1?

Schedule K-1 is used to report the taxpayer's share of income and other distributions, deductions, and credits from partnerships, S corporations, and some estates and trusts. One copy of Schedule K-1 is sent to the IRS which is later matched with individual returns. Another copy of Schedule K-1 is sent to the taxpayer. Ask taxpayers if they received income from a Schedule K-1 entity that reflects their share of income, reportable on their Form 1040. It is very important to correctly report this income to avoid notices or correspondence from the IRS.