11.9 Schedule K-1

Although partnerships, S corporations, trusts, and estates are different types of tax entities, they share a common tax-reporting characteristic. The entity itself generally does not pay income taxes. As a partner, shareholder, or beneficiary, you report your share of the entity’s income or loss. The entity files a Schedule K-1 with the IRS that indicates your share of the income, deductions, and credits passed through from the entity. You will receive a copy of the Schedule K-1, which you should keep for your records; it does not have to be attached to your tax return.

To ensure that Schedule K-1 income is being reported, IRS computers match the information shown on the schedules with the tax returns of partners, S corporation shareholders, and beneficiaries.