How and where can income be reported?

Income reported on Schedule K-1 will be included on the taxpayer's return in various places depending on the type of income. Income reported on Schedule K-1 that is within the scope of VITA/TCE includes:

• Interest income (Form 1040, line 8a, unless Schedule B is required)
• Dividend income (Form 1040, line 9a, unless Schedule B is required)
• Net short-term capital gains and losses (Schedule D, line 5)
• Net long-term capital gains and losses (Schedule D, line 12)
• Tax-exempt interest income (Form 1040, line 8b)
• Royalty income (Schedule E)
  • The way to report income on Schedule E is different for 2011. In Part I, enter a code 6 for royalties. Refer to the Schedule E Instructions for more information.

Royalty income is in scope for the VITA/TCE Program only when the source document of the royalty income is a Schedule K-1. For these investors, the depletion allowance would already have been figured for them by the partnership or S corporation. Royalty income reported on Form 1099-MISC continues to be out of scope.

Any other income, deductions, credits, etc., reported on Schedule K-1 is out of scope for VITA/TCE, and the taxpayer should be referred to a professional tax preparer.