Overview
- Partnerships in the US file Form 1065 to report income, deductions, gains, losses, and other financial information to the IRS each tax year.
- General partnerships, limited partnerships, limited liability partnerships, limited liability companies, and some join ventures need to file Form 1065.
- Foreign partnerships are also required to file if it earns over $20,000 in income, or over 1% of their total business income in the US.
- Only one Form 1065 needs to be filed for the partnership.
- A partnership does not pay taxes on its income, but passes through the profits and losses to its partners.
- Each partner in the business receives a Schedule K-1 from the Form 1065 filing, which shows their share of income, deductions, and credits. They use this information to file their personal tax return.
- Late filing penalties are $220 for each month or part of a month the return is late, multiplied by the number of partners in the partnership during any part of the partnership’s tax year
- IRS Form 1065 is due on on the 15th day of the third month after the tax year ends. If the business uses the calendar year, the due date is March 15th of each year. If a partnership cannot meet this deadline, they can request an extension by filing IRS Form 7004, which gives them an additional six months to file. This would extend the due date to September 15th.
IRS Form 1065, U.S. Return of Partnership Income, is a tax document for partnerships to report their financial information to the IRS. It includes details about the partnership’s income, deductions, gains, losses, and other financial activities for the year. It’s not used to pay taxes but to show the IRS how the business’s income and expenses were divided among the partners.
Each partner then reports their share of the business income or loss on their personal tax returns using another form, Schedule K-1, which is generated from the information on Form 1065. This way, the IRS can make sure that the partnership and its partners are reporting their income correctly and paying the right amount of taxes.
Who needs to file Form 1065?
- General partnerships: Businesses owned by two or more people who share profits, losses, and management responsibilities. Partners in a general partnership are personally responsible for the business’s debts.
- Limited partnerships (LPs): In Limited Partnerships, there are general partners (who manage the business and are personally liable for debts) and limited partners (who invest money but don’t manage the business and have limited liability).
- Limited liability partnerships (LLPs): LLPs are similar to general partnerships but offer some personal liability protection to the partners.
- Limited liability companies (LLCs): If an LLC has chosen to be taxed as a partnership, it must file Form 1065. LLCs can have one or more members, and they offer limited liability protection.
- Foreign partnerships: If a foreign partnership earns over $20,000 in income, or over 1% of their total business income, in the United States, it may also need to file Form 1065, even if its principle place of business is outside of the US or all of its members are foreign persons.
- Certain joint ventures: In some cases, joint ventures that operate as partnerships for tax purposes need to file this form.
Does each partner need to file Form 1065?
No, the partnership files one Form 1065 for the business each tax year. Each partner in these entities receives a Schedule K-1 from the Form 1065 filing, which shows their share of the income, deductions, and credits. They use this information to complete their own personal tax returns.
What happens if you don’t file?
If a partnership fails to file IRS Form 1065 by the deadline or does not request an extension, it can face penalties. The penalties for not filing Form 1065 on time include:
Late Filing Penalty
The IRS charges a penalty if Form 1065 is filed late. For 2023, the penalty is $220 for each month or part of a month the return is late, multiplied by the number of partners in the partnership during any part of the partnership’s tax year. This penalty can be charged for up to 12 months.
Failure to Furnish Schedule K1
Each partner must receive a Schedule K-1, which reports their share of the partnership’s income, deductions, etc. If the partnership fails to provide these on time, there is a penalty of $290 for each Schedule K-1 that wasn’t filed, with a maximum penalty of $3,532,500 for 2023. The $290 penalty can be increased to $580, or 10% of the aggregate amount of items to be reported (whichever is greater), if it was intentionally disregarded by the partnership.
Interest Charges
In addition to penalties, interest may be charged on any taxes that aren’t paid by the due date, even if an extension to file is granted.
How to file Form 1065
Before filling out Form 1065, gather all necessary financial records for the partnership. This includes profit and loss statements, expense reports, partnership agreements, and records of any assets or liabilities.
Form 1065 is divided into several parts:
Page 1 of Form 1065
On page 1 of the form, you’ll need to provide basic information about the partnership, such as its name, address, and Employer Identification Number (EIN). This section also includes the income statement, where you’ll report the partnership’s income, deductions, and profits or losses.
Schedules K and K-1
Schedule K summarizes the partnership’s total income, deductions, credits, etc. Schedule K-1 is used to show each partner’s share of these items, which they must report on their individual tax returns.
Schedule B
This part asks for more detailed information about the partnership, including questions about its type, accounting methods, and ownership. If the answer to all four questions in part 6 of Schedule B is not “yes” then you may need to file out Schedule L, Schedule M-2, or Schedule M-3.
Schedule L, Schedule M-2, and Schedule M-3
Depending on the partnership’s activities, you may need to complete additional schedules and forms, such as Schedule M-3 (if the partnership has assets of $10 million or more), Schedule L (balance sheets), and Schedule M-1 (reconciliation of income).
When is form 1065 due?
IRS Form 1065 is due on on the 15th day of the third month after the tax year ends. If the business uses the calendar year, the due date is March 15th of each year. This deadline applies for filing the form for the previous tax year. For example, for the 2023 tax year, Form 1065 would be due on March 15, 2024.
If March 15th falls on a weekend or a legal holiday, the due date is moved to the next business day.
Extensions
If a partnership cannot meet this deadline, they can request an extension by filing IRS Form 7004, which gives them an additional six months to file. This would extend the due date to September 15th. However, it’s important to note that this extension is for filing the form only, not for paying any taxes owed. If the partnership owes taxes, they should estimate and pay what they owe by the original March 15th deadline to avoid possible penalties and interest.
Also read: Tax Extensions: How to File, Important Rules & Deadlines for 2023
How to submit Form 1065 to the IRS
Before you submit the form, double check all entries for accuracy, then have an authorized partner sign the form. If a paid preparer completed the form, they must also sign and include their Preparer Tax Identification Number (PTIN).
You can file Form 1065 electronically through IRS e-file, which is the preferred method, or mail a paper copy to the IRS.
- If you file a paper return: The IRS will consider your return on time if you mailed it by the due date. The return must have been correctly addressed with enough postage, and postmarked.
- If you file an electronic return: The IRS will consider your return on time if you electronically submitted your return by the due date. Your local time zone will be used to determine the time and date it was submitted.
Mailing address
The address for mailing in your Form 1065 to the IRS depends on your partnership’s location and whether a payment is included.
| IF the partnership’s principal business, office, or agency is located in: | And the total assets at the end of the tax year are: | Use the following Internal Revenue Service Center address: | |
|---|---|---|---|
| Connecticut, Delaware, District of Columbia, Georgia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, Wisconsin | Less than $10 million and Schedule M-3 is not filed | Department of the Treasury Internal Revenue Service Kansas City, MO 64999-0011 | |
| Connecticut, Delaware, District of Columbia, Georgia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, Wisconsin | $10 million or more or less than $10 million and Schedule M-3 is filed | Department of the Treasury Internal Revenue Service Ogden, UT 84201-0011 | |
| Alabama, Alaska, Arizona, Arkansas, California, Colorado, Florida, Hawaii, Idaho, Iowa, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Washington, Wyoming | Any amount | Department of the Treasury Internal Revenue Service Ogden, UT 84201-0011 | |
| A foreign country or U.S. possession | Any amount | Internal Revenue Service P.O. Box 409101 Ogden, UT 84409 | |
Also read: When Are Taxes Due? Important Deadlines for the 2022 & 2023 Tax Years