Introduction
If you’ve formed a partnership or multi-member LLC in the U.S., chances are you’ve heard of IRS Form 1065. This tax return isn’t about paying taxes — it’s about reporting your partnership’s income, deductions, and profits to the IRS. Filing correctly is essential for compliance, avoiding penalties, and keeping your partners happy.
This guide will break down everything you need to know about Form 1065, including who files it, how to prepare it, deadlines, and examples — all in clear, easy-to-follow language.
What is Form 1065?
IRS Form 1065 is the tax return used by partnerships and multi-member LLCs to report financial activity for the year. Unlike corporations, partnerships don’t pay income taxes directly. Instead, the profits and losses "pass through" to the individual partners, who report them on their personal tax returns using Schedule K-1.
Who Needs to File Form 1065?
You must file Form 1065 if:
- You run a general partnership, limited partnership, or multi-member LLC.
- Your business had any income or expenses during the tax year — even if you didn’t make a profit.
- You operate in the U.S. or are required to file under U.S. tax law.
📌 Example:
If John and Sarah start an online consulting business as a 50/50 partnership and earn $75,000 in 2024, they must file Form 1065 for that year — even if they reinvest all the profits back into the business.
What Does Form 1065 Include?
Filing Form 1065 involves reporting:
- Gross income
- Business expenses
- Net profit or loss
- Balance sheet data (assets, liabilities, equity)
- Partner information
- Distributions made to partners
- Other financial details
It also includes:
- Schedule B – Other information about the business
- Schedule K – Totals for income, credits, and deductions
- Schedule K-1 – Each partner’s share of income/loss
When Is Form 1065 Due?
For most partnerships, Form 1065 is due by March 15 of the following tax year (e.g., March 15, 2025, for the 2024 tax year). You can request a 6-month extension using Form 7004 if needed.
💡 Tip: Even if you file for an extension, you still need to deliver Schedule K-1s to each partner by March 15 unless an extension is filed.
Simple Example: How It Works
Let’s say your partnership made $120,000 in revenue and had $40,000 in expenses. You have two partners splitting profits 50/50.
-
You file Form 1065, reporting:
- Gross income: $120,000
- Expenses: $40,000
- Net profit: $80,000
- Each partner gets a Schedule K-1 showing $40,000 in income.
- Each partner uses their K-1 to file their personal Form 1040, paying taxes on that $40,000.
The partnership itself doesn’t pay any federal income tax.
What Documents Do You Need?
Before filing, gather:
- Business income & expense reports
- Bank statements
- Partner agreements
- Capital contributions
- Previous tax returns (if any)
- Partner info for Schedule K-1
Common Mistakes to Avoid
Here are a few errors to watch out for:
❌ Missing the deadline or not filing an extension
❌ Incorrectly allocating income to partners
❌ Failing to include all required schedules
❌ Not sending Schedule K-1s to partners
❌ Ignoring state filing requirements
Why It’s Important to File Correctly
A proper 1065 filing ensures:
- Transparency between partners
- Compliance with the IRS
- Smooth financial operations
- Avoidance of late penalties ($220+ per partner, per month!)
💼 Pro Tip: Use cloud accounting tools like QuickBooks, Xero, or Zoho Books to track partnership activity year-round and simplify tax prep.
Should You Outsource Help?
Many CPA firms and partnerships choose to outsource Form 1065 filing to professionals to save time and ensure accuracy. At Trusty Accounts, we support small businesses and CPA firms with partnership tax prep, Schedule K-1 allocations, and IRS compliance — giving you confidence, accuracy, and peace of mind.
Final Thoughts
If your business is structured as a partnership or multi-member LLC, filing Form 1065 is a must. By keeping accurate records, distributing Schedule K-1s on time, and understanding the form’s components, you can stay compliant and avoid costly mistakes.
Whether you're filing your first 1065 or helping a client through the process, the key is preparation — and Trusty Accounts is here to help if you need expert tax support.