If you are a beneficiary of an estate or a trust, a partner in a partnership, a member in a multi-member limited liability company, or a shareholder in an S corporation, you will receive a Schdeule K-1 each year that contains various information used to prepare your personal income tax return.
NOTE: Schedule K-1 is not applicable to shareholders of Regular C Corporations.
Estates, trusts, partnerships, multi-member limited liability companies, and S corporations are known as "pass-through" entities.
What is Schedule K-1 For?
Schedule K-1 provides information that is necessary to prepare the taxpayer's personal income tax return, Form 1040.
Schedule K-1 is also part of the entity's federal income tax return filed with the IRS each year.
Schedule K-1 is an annual tax statement that should be given to each taxpayer each year.
Schedule K-1 is not filed with your income tax return but you should keep a copy with your other tax records.
Schedule K-1 is often mailed later in the year so be sure you have received your copy BEFORE you file your personal taxes.
If you fail to report the information from your Schedule K-1 on your personl tax return, you will most likely at some point will receive an IRS notice regarding the missing information and may have to file an amended income tax return.
NOTE: Taxpayers should also request from the entity their partner or shareholder basis statement which is or may be necessary for their personal income tax return each year.
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