By: Ashley M. Hoy
Have you ever filed your tax return and sometime, several months later, received a K-1 tax form in the mail? This form has a notorious reputation for arriving late- even as late as October! K-1 tax forms can often be lengthy- in some instances over 20 pages long. If you don’t own private or alternative investments, this may not be a tax form that you’re familiar with. But what exactly is this form?
Current tax code in the United States allows, in some instances, pass-through taxation. Pass-through taxation shifts tax liability from an entity to an individual that has an interest in the entity. The K-1 tax form is prepared by the entity to state each partner’s interest in the entity or partnership. The form will further detail the partner’s share of the returns based on the amount of capital the partner has in the entity. Basis will be increased by capital contributions and share of income, and it will be reduced by withdrawals and a partner’s share of losses. [1]
The K-1 tax form contains information that a recipient will need to complete and file their personal tax return. The K-1 recipient does not need to file the K-1 with the IRS- the issuing entity will file that same K-1 form and information with the IRS. Since the issuing entity does not generate the K-1 tax form until the entity completes its tax return, the form is often sent to recipients well past the April 15th deadline.
There are three types of K-1 forms, depending on the entity that is issuing it. The first type is Partnership K-1, which is issued by Partnerships. If you are invested in private or alternative investments, this will likely be the type of tax form received by the investor. The second type is an S-Corporation K-1, which is issued to shareholders of a corporation. The third type is an Estate or Trust K-1. These are issued to beneficiaries of the estate or trust. [2]
If you’re new to investing in private and alternative investments, be sure to ask if the fund will issue a K-1 or a 1099 for tax reporting. It’s best to provide your financial advisor with your accountant or tax preparer’s contact information. With permission, the advisor and the tax preparer can work collaboratively to request an extension (when necessary) and to deliver all K-1s from the advisor to the tax preparer as soon as the forms become available.
If you have any questions or would like to learn more about how Bickling Financial Services can work with you, please contact our office at 781-862-9792.
[1] Schedule K-1 Federal Tax Form: What Is It and Who Is It For? (2024, September 09). Investopedia. Retrieved May 27, 2025 from https://www.investopedia.com/terms/s/schedule-k-1.asp [2] What is a Schedule K-1 Tax Form? (2025, May 28). Turbo Tax. Retrieved May 29, 2025 from https://turbotax.intuit.com/tax-tips/small-business-taxes/what-is-a-schedule-k-1-tax-form/L95lj0sJq
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