Dear Tax Talk,
We have a part-time business. We have a two-man partnership. Our income for the entire year was $13,000. What partnership tax forms should I file?
--Richard
Dear Richard,
Partnerships are required to file Form 1065 annually by April 15 of the following tax year. Form 1065 is an information return, as the partnership does not pay income tax, but rather distributes it to its partners, who pay any corresponding taxes.
Recently expanded from four to five pages, Form 1065 can be fairly straightforward for experienced preparers, or gut-wrenching for the novice. If you're thinking of preparing the tax return yourself, I suggest you buy a tax program to help you ensure its completeness.
For example, in completing Form 1065, you're required to include a Schedule K-1 for each partner. You may also be required to complete self-employment net earnings. These additional steps are usually covered by a tax software program that retails for around $100 and will help you stay out of trouble with the IRS in processing the tax return.
The income from the partnership is required to be reported by the partners. The income reported on each partner's Schedule K-1 would then be transferred to Schedule E, page 2 of the partner's individual income tax return.
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