Schedule K-1 (Form 1065 and Form 1120S)

Partnerships use Form 1065, Schedule K-1 to report the taxpayers' share of the partnership's income, deductions, credits, etc. In general, a partnership is not subject to income tax and is a flow-through entity. This means the income flows through to the partners, who pay tax on their applicable share.

S corporations use Form 1120S, Schedule K-1 to report the taxpayers' share of the S corporation's income (reduced by any tax the corporation paid on the income), as well as any deductions, credits, etc. The S corporation is also a flow-through entity with the income flowing to each shareholder. Shareholders pay tax on their allocated share of the income.

Taxpayers receive Schedule K-1 (Form 1065 or Form 1120S) reporting their share of income from interest, dividends (ordinary and qualified), and capital gains (net short-term and net long-term) from partnerships and corporations. Schedule K-1, page 2, lists the appropriate forms and schedules where the taxpayers' income from these sources should be reported.