The Schedule K-1 form is used to report earnings from partnerships, S corporations, estates, and trusts. It outlines each partner's or shareholder's share of income, deductions, and credits. These earnings are typically reported on personal tax returns, reflecting the pass-through nature of income in these entities.

Key information provided on a K-1 form includes:

  • Income from operations: This can include business profits, dividends, or rental income.
  • Deductions and credits: These reduce taxable income and may be passed to partners or shareholders.
  • Capital gains: Profits from the sale of assets owned by the partnership or corporation.

K-1 earnings do not result in direct tax payments; instead, the income "passes through" to the individual taxpayer’s return.

Below is an example of the key sections on a K-1 form:

Box Description
Box 1 Ordinary business income
Box 2 Net rental real estate income
Box 3 Other portfolio income