Form 1065 is a document issued by the United States Internal Revenue Service (IRS) for specific tax purposes related to a business partnership. The full name of this form is the U.S. Return of Partnership Income. It is used to report information such as income, losses, gains, credits, or deductions, accumulated during the operation of a partnership for a tax year. It can be filed electronically; and, it must be filed on time – by 15 April, unless the 15th falls on a Saturday, a Sunday, or an extension is given.
Form 1065 is necessary because each partner contributes to the partnership and in return, shares any profits or losses that the business experiences. The partnership itself never pays taxes on the income it makes, but it passes those profits or losses through to its partners who pay taxes. The partners also receive deductions or credits as they are passed through from the partnership.
There are several kinds of partnerships, and each one has specific rules as to whether it should file Form 1065. For example, it is unusual for a domestic partnership, a partnership based in the United States, not to file a 1065. This might happen if the partnership did not make any income nor have any expenses that could be deducted or credited. Other examples of partnerships include a foreign partnership: if it is connected with trade or business in the United States, it will also likely have to file Form 1065. Even if a business is an LLC, it must file a 1065. And, religious organizations that are exempt from paying income taxes must file, as well.
There are several additional schedules that may need to be filled out and filed with Form 1065. Most of them are located directly on the form itself. However, depending on they type of partnership, not all of the schedules need to be filed. Most of the schedules give additional financial information on the partnership and the contribution and shares of the income and losses for individual partners.
Any tax-related document can be confusing to figure out and file. There are detailed instructions on the IRS website. However, they can be a bit overwhelming and confusing as well. With the help of a good tax attorney or accountant, any specific questions can be answered clearly and accurately. In many cases, the attorney or accountant will simply ask for the paper work associated with the partnership and fill out Form 1065 on behalf of the partnership.
