K-1 Tax Form Explained
What is a K-1 Tax Form? The Schedule K-1 is a standard IRS form that is issued annually to report activity from investments in partnership interests. The K-1 will report your share of any taxable items for the calendar year for investments that you hold membership interest in.
Should I expect to receive a K-1 or a 1099?
If you are an investor in a CrowdStreet Marketplace deal, you generally hold membership interest in a real estate LLC (limited liability company) treated as a partnership for tax purposes. As such, the taxable activity earned by the partnership is allocated to all of the individual members (partners) based on ownership percentage and is reported to the investors through the K-1. Your K-1 will be issued to you from the sponsor of the deal that you are invested in.
Investors who are invested in an LLC taxed as a partnership will receive a Schedule K-1, while REITs (real estate investment trusts) will issue a 1099 to show your taxable interest and/or dividends.
To learn more about taxes relating to commercial real estate, the real estate Schedule K-1, and if items such as depreciation will be included on the K-1, please visit the following articles in the CrowdStreet resource library below. Please keep in mind CrowdStreet does not offer tax advice. You should consult with a tax professional on your particular situation.
How many K-1s will I receive?
An investor will receive a single federal Schedule K-1 for its investment in any Marketplace deal. Investors that have invested in more than one deal on the Marketplace will receive a separate federal Schedule K-1 for each investment.
You should also expect to receive a state K-1 for the state that the property of the real estate investment is located in, unless the investment is held in a state that does not assess state income tax (refer to the article Do I need to file out-of-state tax returns and why?).
Additionally, if you transferred your investment from one entity to another during the year, you should expect to receive a K-1 for each entity that at any point held the investment.
Will I still receive a K-1 even if I haven’t received a distribution yet and there is no income to report?
You should generally expect to receive a Schedule K-1 from sponsors that shows your allocable share of any income and/or loss items earned by real estate partnership. In some cases, sponsors may not issue a K-1 if the property of the real estate partnership did not generate gross income or did not incur any amount that would be treated as a deduction or credit for federal tax purposes. Most investments that would identify with this situation include properties that are in the development stage. In the development stage, the building generally is not yet placed-in-service and therefore no taxable income or deductible expenses would have been generated.
For more information regarding this topic, visit the sources below:
FAQs
Schedule K-1 is an IRS form used by partnerships, S corporations, and estates and trusts to declare the income, deductions, and credits that partners, shareholders, and beneficiaries have received in the tax year. Individual taxpayers transfer the financial information on their K-1s to their tax returns.
How do I fill out a K-1 tax form? ›
What are the Schedule K-1 instructions?
- Part I asks for information about your company.
- Part II asks for information about the partner or shareholder. ...
- Part III is where you detail the partner or shareholder's share of income, gains, losses, deductions, and credits.
In general, a K-1 can affect personal taxes in two ways: either by increasing a partner's tax liability or by providing them with a tax deduction. It will likely increase their total tax liability for the year if the K-1 is associated with an income.
Can I do my own K1? ›
You are not responsible for filling out your own K-1 unless you are the general partner. In Part I, the partnership must provide its identifying information such as name and address, as well as where they file their tax return as an organization.
Do I need to file K-1 if no income or loss? ›
If your business is operating at a loss and there is no taxable income for any partner or shareholder to report, the partnership is still responsible for issuing Schedule K-1s.
What is a K-1 statement? ›
Schedule K-1 is an IRS form used by partnerships, S corporations, and estates and trusts to declare the income, deductions, and credits that partners, shareholders, and beneficiaries have received in the tax year. Individual taxpayers transfer the financial information on their K-1s to their tax returns.
Who needs to fill out a K-1 form? ›
Business partners, S corporation shareholders, and investors in limited partnerships and certain ETFs use Schedule K-1 to report their earnings, losses, and dividends.
Does a K1 count as income? ›
Ordinary income reported to an individual shareholder on Schedule K-1 from an S-Corporation is not considered earned income. Such income is investment income, thus not subject to self-employment tax, and it isn't taken into account when calculating a tax credit that uses earned income in its calculation.
Does k1 income count as earned income? ›
Ordinary income reported to an individual shareholder on Schedule K-1 from an S corporation is not considered self-employment income. Such income is investment income. It is thus not subject to self-employment tax, nor is it included in the calculation of earned income for the credits that are based on earned income.
What happens if I don't report k1 income? ›
Generally, the omission of income reported on Schedule K-1 from your return will generate an IRS notice regarding the missing income if it is substantial enough to generate a tax liability.
Generally, the partnership itself is not liable for taxes on income generated by the business. Instead, each partner is subject to those income taxes based on their ownership percentage in the business.
Do I need to report K1 to the IRS? ›
Purpose of Schedule K-1
The partnership uses Schedule K-1 to report your share of the partnership's income, deductions, credits, etc. Keep it for your records. Don't file it with your tax return unless you're specifically required to do so.
Who pays taxes on a k1? ›
Partnership Schedule K-1's
The partners are then responsible for paying taxes on the income. Partnerships are considered “pass-through” entities, meaning the business itself does not pay taxes; the partners do. In this case, each partner receives a K-1 statement that reports their earnings, deductions, and credits.
Can you use TurboTax if you have a K1? ›
TurboTax Desktop
Open TurboTax and continue your return. Using the search bar, type K-1 and select the Jump to link in the search results. This will take you to the Schedule K-1 and Schedule Q screen. Select I'll choose what I work on and continue until you reach the Your 2023 Income Summary screen.
Is K-1 income considered earned income? ›
Ordinary income reported to an individual shareholder on Schedule K-1 from an S corporation is not considered self-employment income. Such income is investment income. It is thus not subject to self-employment tax, nor is it included in the calculation of earned income for the credits that are based on earned income.
What is box 14 on the k1 schedule? ›
Box 14 Self Employment Earnings (Losses)
If there is a positive amount reported to you in this box, please report the amount as it is reported to you. This will be reduced appropriately by the program by any section 179 deduction you previously reported.
What is the capital account of a k1? ›
Section L on the partnership K-1 schedule represents each partner's equity in the partnership. Since your partnership has only be in existence a few years, you may be able to calculate the number.
