Partnership Income Tax Return (Form 1065)
What is Form 1065?
Form 1065, also known as the U.S. Return of Partnership Income, is used by partnerships to report their financial information, including income, deductions, and credits. It allows partnerships to determine the amount of profit or loss to pass through to each partner. Each partner then reports their share on their individual tax returns. Partnerships themselves are not directly taxed; instead, taxes are assessed on the partners based on their share of the partnership’s income.
When is the Due Date?
The due date for filing Form 1065 is typically March 15th of the following year (for calendar-year partnerships). If March 15th falls on a weekend or holiday, the due date is the next business day. Partnerships needing extra time may file for an extension, allowing them until September 15th to submit Form 1065. Note that each partner still needs to report income and may be subject to penalties if Form 1065 or the Schedule K-1 is late.
What Information Do You Need to Provide?
Partnership Information
Name: Partnership’s legal name as registered.
Employer Identification Number (EIN): Partnership’s unique EIN, provided by the IRS.
Principal Business Activity: The primary type of business the partnership engages in.
Business Code Number: Industry code based on the partnership's primary activities.
Principal Business Address: Main office location of the partnership.
Income Documentation
Sales and Gross Receipts: Income generated directly from business activities.
Other Income Sources: Revenue not directly from sales, such as investment income, interest, and gains from asset sales.
Cost of Goods Sold (COGS): If applicable, provide COGS documentation related to inventory, labor, and materials costs for the production of goods.
Deductions and Expenses
Operating Expenses: Costs directly tied to operations, such as salaries, rent, utilities, and office supplies.
Depreciation: Depreciation expense for business assets like equipment, buildings, or vehicles (Form 4562 is often needed).
Travel and Meals: Documentation of necessary travel or meal expenses.
Interest Payments: Interest paid on business loans.
Other Deductions: Include items like advertising, insurance, and employee benefits.
Guaranteed Payments: Partnerships must report guaranteed payments made to partners for services or use of capital. These are similar to salaries in a corporation, as they are payments partners receive regardless of the partnership’s profitability.
Distributive Shares and Schedule K-1
Schedule K-1: Partners receive this form outlining their share of the partnership’s income, deductions, and credits, which they report on their individual returns.
Allocation of Profits/Losses: Based on the partnership agreement, each partner’s share of the income, deductions, and credits is calculated and reported here.
Tax Credits and Other Deductions
Research and Development (R&D) Tax Credit: If the partnership is eligible for credits from R&D expenditures.
Energy Credits: For businesses involved in renewable energy projects.
Foreign Tax Credit: If the partnership has paid taxes to a foreign government.
Estimated Tax Payments: Though partnerships themselves typically aren’t taxed, some may make estimated payments on behalf of partners or on nonresident state tax filings. Documentation of these payments is necessary.
Additional Information to Collect
Balance Sheet Information: Partnerships must provide details on assets, liabilities, and equity.
Foreign Accounts & Assets: If the partnership has foreign accounts or receives income from foreign entities, it may need to complete Form 8865 or other foreign disclosure forms.
Basis Calculations: Partners must maintain records of their basis (investment) in the partnership, which affects their ability to deduct losses.
Why Choose 30A Coastal Accounting Services?
At 30A Coastal Accounting Services, we’ll guide you through each step of filing Form 1065. With our CPA and tax expertise, we ensure that each partner’s share is accurately calculated, all deductions are claimed, and compliance is maintained with IRS requirements. We look forward to assisting with your corporate tax needs.
Contact Us Today!
To schedule or learn more about our tax preparation services, please contact us. We look forward to helping you with your tax needs.
Partnership Tax Return Information Checklist
Basic Partnership Information
Partnership Name and EIN
Business Address and Contact Information
Tax Year (Calendar or Fiscal)
Principal Business Activity and Business Code (NAICS)
Partner Information
Partner Names, Addresses, and Identification Numbers
Ownership Percentages (based on profit, loss, and capital)
Partner Contributions (cash, property, services)
Partner Withdrawals and Distributions for the year
Changes in Ownership (if any, including new or existing partners)
Income Information
Gross Receipts or Sales
Other Business Income (interest, rental, etc.)
Returns and Allowances (for sales-based partnerships)
Expense Information
Cost of Goods Sold (COGS) (beginning inventory, purchases, ending inventory)
Operating Expenses:
Salaries and Wages (excluding partners)
Rent (business property)
Utilities and Office Expenses
Advertising and Marketing
Insurance (non-partner benefits)
Legal and Professional Fees
Travel, Meals, and Entertainment
Repairs and Maintenance
Depreciation and Asset Information
Asset Purchases (date, cost, and description of any major equipment or property acquired)
Depreciation Schedules (prior and current year)
Disposition of Assets (any assets sold, exchanged, or disposed of)
Liabilities and Loans
Outstanding Debts and Loans (including interest rates and terms)
New Loans or Liabilities for the year
Interest Expense (amounts paid on business loans and lines of credit)
Additional Deductions and Credits
Qualified Business Income (QBI) Deduction Eligibility
Credits (research and development, energy credits, etc.)
Contributions to Retirement Plans (SEP, SIMPLE, 401(k))
Balance Sheet Information
Beginning and Ending Balance Sheets
Capital Accounts (each partner's capital account for the year)
Loans to Partners or Related Parties
Liabilities (accounts payable, notes payable)
Other Required Documentation
Prior Year Tax Return (Form 1065) for reference
K-1 Forms for Each Partner (to report each partner’s share of income, deductions, credits, etc.)
Any Changes in Partnership Agreement (if applicable)
