What Form 1065 Is For

Form 1065 is the tax information return that partnerships file with the IRS to report their annual financial activity. Think of it as the partnership's yearly financial report card—but with an important twist: the partnership itself doesn't pay taxes. Instead, Form 1065 serves as a pass-through document that shows how the partnership's income, losses, deductions, and credits flow through to each individual partner.

When you file Form 1065, you're essentially telling the IRS: “Here's what our partnership earned and spent this year, and here's how we're dividing it among our partners.” Each partner then receives a Schedule K-1—their personalized tax statement showing their share of the partnership's financial activity—which they use to complete their individual tax returns (Form 1040 for individuals, or other appropriate returns for corporate or foreign partners).

This system ensures that partnership income is taxed only once, at the partner level, avoiding the double taxation that corporations face. Whether you're running a small consulting firm with two partners or a large investment partnership with dozens of members, Form 1065 is your required annual filing with the IRS.

When You’d Use Form 1065 (Late or Amended)

Filing Late or Requesting an Extension

For the 2013 tax year, partnerships with a calendar year-end had until April 15, 2014, to file Form 1065 (or the 15th day of the 4th month after the partnership's fiscal year ended).

If you realized you couldn't meet the deadline, you should have filed Form 7004 by the original due date to request a 5-month extension, giving you until September 15, 2014. This extension was automatic—you didn't need IRS approval—but you had to submit the form on time.

Partnerships keeping records outside the United States automatically received a 2-month extension (to June 15 for calendar-year partnerships) by attaching a qualifying statement to their return.

Filing an Amended Return

If you discovered an error after filing, for 2013 returns the procedures for amending depended on whether you filed electronically or on paper.

If filing electronically, you would complete Form 1065 and check box G(5) to indicate an amended return, attaching a statement identifying each amended item with explanations.

If the income, deductions, or credits provided to any partner on Schedule K-1 were incorrect, you would file an amended Schedule K-1 for that partner, checking the “Amended K-1” box at the top.

Common reasons for amendments include:

• Discovering unreported income
• Finding calculation errors on Schedule K-1s
• Correcting partner allocation percentages
• Adjusting for previously overlooked deductions

Key Rules for 2013

Who Must File

Every domestic partnership that received income or incurred deductible expenses during 2013 had to file, with limited exceptions.

Foreign partnerships with U.S.-source income or effectively connected U.S. business income also had filing obligations.

However, married couples running a joint business could elect “qualified joint venture” status and avoid filing Form 1065 by reporting their shares on separate Schedules C instead.

Partnership Definition

The IRS broadly defined partnerships to include limited partnerships, LLCs with two or more members (unless they elected corporate treatment), joint ventures, syndicates, and any unincorporated group carrying on business for profit.

Simply co-owning rental property didn't create a partnership unless you provided substantial services to tenants.

Electronic Filing Requirements

Partnerships with more than 100 partners were required to file electronically in 2013. Smaller partnerships had the option but weren't mandated. Hardship waivers were available by written request to the Ogden Service Center.

Signature Requirement

The return wasn't considered valid unless signed by a general partner or LLC member manager. An unsigned return was treated as not filed, potentially triggering penalties.

Schedule K-1 Timing

Partnerships had to furnish each partner their Schedule K-1 by the same deadline as Form 1065—no extensions were granted. Late K-1s caused cascading issues for partners’ individual returns.

Special 2013 Provision

Due to legislation enacted after forms were printed, partnerships could elect to deduct certain cash contributions for Philippines typhoon relief made between March 26 and April 15, 2014, on their 2013 returns rather than 2014.

Step-by-Step Filing Process (High Level)

1. Gather Financial Records (January–March 2014)

Collect your partnership's complete financial statements for 2013: all income records, expense receipts, asset purchase documentation, and your partnership agreement showing profit/loss allocation percentages.

2. Calculate Partnership Income and Deductions (March 2014)

Complete income and deduction sections on Form 1065 to determine ordinary business income or loss.

3. Complete Schedules (March–April 2014)

Fill out Schedules B, K, L, M-1, and M-2 as required to summarize partnership activities and reconcile book vs. tax income.

4. Prepare Individual Schedules K-1 (March–April 2014)

Prepare separate Schedules K-1 for each partner showing their ownership percentage and allocations.

5. Review and Sign (April 2014)

A general partner or member manager must review and sign the completed return; preparers must include their PTIN.

6. File and Distribute (by April 15, 2014)

Submit Form 1065 with all attachments and provide each partner with their K-1.

7. Address Follow-Up Questions (Summer–Fall 2014)

Respond promptly to any IRS correspondence or clarification requests.

Common Mistakes and How to Avoid Them

Mistake #1: Late or Missing Schedule K-1s

Failing to deliver K-1s on time creates issues for partners.
Solution: Set an internal completion deadline of March 31.

Mistake #2: Incorrect Profit/Loss Allocations

Allocations sometimes don’t match the partnership agreement.
Solution: Review agreements carefully and document allocation methods.

Mistake #3: Mismatched Book and Tax Numbers

Errors in reconciliation schedules can flag IRS scrutiny.
Solution: Track book-tax differences throughout the year.

Mistake #4: Missing or Incomplete Schedule B Questions

Unanswered questions can trigger IRS inquiries.
Solution: Answer every question, especially international ones.

Mistake #5: Failing to Track Partner Basis

Partners need basis tracking for accurate loss deductions.
Solution: Include a supplemental statement with each K-1.

Mistake #6: Not Filing or Filing Late Without Extension

Late filings lead to $195 per partner per month penalties.
Solution: File Form 7004 for automatic extensions.

Mistake #7: Unsigned Returns

Unsigned returns are treated as unfiled.
Solution: Add signature verification to your filing checklist.

What Happens After You File

Immediate Processing (April–June 2014)

IRS verifies schedules, math accuracy, and data entry.

Partner Matching (Summer 2014)

IRS cross-checks K-1 data between partnerships and partners.

Selective Review (2014–2016)

The IRS may conduct partnership-level examinations.

Three-Year Audit Window

Generally, the IRS has three years from the filing date to examine the return.

Recordkeeping Obligations

Maintain records and documentation for at least three years.

State Filing Obligations

Most states require separate partnership returns and amendments.

Penalty Assessments (If Applicable)

Late filings and missing K-1s can trigger penalties, though abatement is possible with reasonable cause.

FAQs

Q1: Our partnership had no activity in 2013—do we still need to file Form 1065?

No, unless you had any income or deductible expenses. Many file anyway to maintain EIN status.

Q2: What if we missed the April 15 deadline and didn’t file an extension?

File immediately. Penalties accrue monthly but can be abated for reasonable cause.

Q3: One partner’s SSN on their K-1 is wrong—how do we fix this?

File an amended return with a corrected K-1 marked “Amended.”

Q4: Can we file Form 1065 electronically?

Yes, and partnerships with more than 100 partners were required to do so in 2013.

Q5: We dissolved our partnership in 2013—do we still file Form 1065?

Yes. File a final return for the period until dissolution and check “final return.”

Q6: What’s the difference between guaranteed payments and distributive share?

Guaranteed payments are fixed amounts paid to partners, deductible by the partnership. Distributive share is income allocated based on partnership performance.

Q7: We’re a husband-wife LLC—do we have to file Form 1065?

Not necessarily. You may elect “qualified joint venture” status and file separate Schedules C instead.