Form 1065 for Tax Year 2013: IRS-Accurate Compliance Checklist and Instructions
Overview of Form 1065 for Tax Year 2013
Form 1065, U.S. Return of Partnership Income, is an information return used to report the income, gains, losses, deductions, and credits from the operation of a partnership. The partnership itself does not pay income tax. Instead, it passes through profits or losses to its partners, who must report their share on their individual or business tax returns.
For tax year 2013, partnerships must comply with specific filing requirements, deadlines, and reporting obligations. This checklist provides step-by-step guidance to ensure accurate and timely filing.
Key Updates and Special Provisions for 2013
Schedule K-1 Code Y Addition
For 2013, the IRS added new code Y to box 20 of Schedule K-1. This code is used to report information related to the net investment income tax under section 1411. Former code Y, which was used for other information, has been renumbered to code Z. Partnerships must use code Y to provide partners with information necessary to compute their net investment income tax liability.
Retroactive Typhoon Haiyan Charitable Contributions
The Philippines Charitable Giving Assistance Act allows partnerships and their partners to treat specific charitable cash contributions as 2013 deductions. Contributions made after March 25, 2014, and before April 15, 2014, for relief of Typhoon Haiyan victims in the Philippines can be treated as if made on December 31, 2013.
When preparing the 2013 tax return, complete the forms as if these contributions were made on December 31, 2013, instead of in 2014. The contribution must be made to a qualified organization and meet all other requirements for charitable contribution deductions.
Step-by-Step Compliance Checklist
Step 1: Determine Filing Requirements
Review whether your partnership is required to file Form 1065. Generally, every domestic partnership must file unless it neither receives income nor incurs any expenditures treated as deductions or credits for federal income tax purposes.
Certain foreign partnerships with U.S. source income may qualify for filing exceptions if they meet specific criteria, including having no effectively connected income, limited U.S. source income, minimal U.S. partner ownership, and proper withholding compliance.
Step 2: Verify Filing Deadline
Form 1065 for tax year 2013 must be filed by the 15th day of the 4th month following the end of the partnership’s tax year. For calendar year partnerships ending December 31, 2013, the filing deadline is April 15, 2014. If this date falls on a Saturday, Sunday, or legal holiday, file by the next business day.
Partnerships that keep records and books of account outside the United States and Puerto Rico receive an automatic two-month extension to the 15th day of the 6th month following the close of the tax year. No Form 7004 is required for this extension, but attach a statement to the return explaining the qualification.
Step 3: Request Additional Filing Extension if Needed
If additional time is needed beyond the regular due date, file Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns, by the original due date.
Form 7004 provides a five-month extension, making the extended deadline September 15, 2014, for calendar year partnerships. This extension runs concurrently with the two-month extension for partnerships maintaining records outside the United States.
Step 4: Determine Balance Sheet Filing Requirements
Partnerships are not required to complete Schedules L, M-1, and M-2 if all of the following conditions are met:
● The partnership’s total receipts for the tax year were less than $250,000.
● The partnership’s total assets at the end of the tax year were less than $1 million.
● The partnership is not filing or required to file Schedule M-3.
● The partnership is not publicly traded.
If any of these conditions are not met, complete all the necessary schedules.
Step 5: Determine Schedule M-3 Filing Requirements
A partnership must complete Schedule M-3, Net Income (Loss) Reconciliation for Certain Partnerships, instead of Schedule M-1 if any of the following apply:
● The amount of total assets at the end of the tax year is $10 million or more.
● The amount of adjusted total assets for the tax year is $10 million or more.
● The amount of total receipts for the tax year is $35 million or more.
A reportable entity partner owns, or is deemed to own, directly or indirectly, an interest of 50% or more in the partnership’s capital, profit, or loss on any day during the tax year.
Any partnership required to file Schedule M-3 must also complete and file Schedule C, Additional Information for Schedule M-3 Filers. Partnerships not required to file Schedule M-3 may voluntarily do so instead of filing Schedule M-1.
Step 6: Calculate and Report Section 179 Expense Deduction
For tax year 2013, the maximum Section 179 expense deduction is $500,000. This amount is reduced dollar-for-dollar when total qualifying property placed in service during the year exceeds $2,000,000. The deduction phases out entirely when qualifying property reaches $2,500,000.
For qualified real property, including qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property, partnerships may elect to treat up to $250,000 as Section 179 property. This $250,000 limit for qualified real property counts toward the overall $500,000 annual limitation.
The Section 179 deduction is claimed at the partnership level but is subject to limitations at the individual partner level based on each partner’s taxable income and other factors.
Step 7: Prepare and Distribute Schedule K-1 to Each Partner
The partnership must provide Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc., to each partner by the due date of Form 1065, including extensions. Schedule K-1 reports each partner’s distributive share of partnership items.
For 2013, use the updated Schedule K-1 with code Y in box 20 for net investment income tax information. Ensure accurate reporting of each partner’s beginning and ending ownership percentages, share of partnership liabilities, and capital account information.
Partners use Schedule K-1 to report their share of partnership income, deductions, and credits on their individual or business tax returns. The partnership files copies of all Schedules K-1 with the IRS along with Form 1065.
Step 8: Report Net Investment Income Tax Information
Partnerships must report information relevant to the net investment income tax using code Y in box 20 of Schedule K-1. This information helps partners who are individuals, estates, or trusts compute their net investment income tax liability under section 1411.
Provide sufficient detail for partners to determine which items of partnership income, gain, loss, and deduction are included in net investment income. Attach a statement if necessary to explain the nature and amount of items reported under code Y.
Step 9: Understand Penalty Provisions
Partnerships face penalties for noncompliance with filing and reporting requirements:
For failure to file Form 1065 by the due date or filing an incomplete return, the penalty is $195 per month or part of a month, up to 12 months, multiplied by the total number of partners during any part of the partnership’s tax year. This penalty applies unless the failure is due to reasonable cause.
For failure to furnish Schedule K-1 to a partner when due or for furnishing incorrect information, the penalty is $100 per Schedule K-1 for which a failure occurs. The maximum penalty is $1,500,000 for all such failures during a calendar year. If the failure involves intentional disregard, the penalty increases to $250 per Schedule K-1, or 10% of the aggregate amount of items required to be reported, whichever is greater, with no maximum limit.
Partnerships with more than 100 partners are required to file Form 1065 and Schedules K-1 electronically. Failure to e-file when required may result in additional penalties.
Step 10: Maintain Proper Records and Documentation
Keep all records supporting items on the partnership return for at least three years from the date the return is due or filed, whichever is later. Records that verify the partnership’s basis in property must be kept for as long as needed to figure the basis of the original or replacement property.
Maintain documentation of all income, deductions, credits, and distributions. Keep copies of all filed returns, Schedules K-1, and supporting statements. Proper recordkeeping ensures compliance with IRS requirements and facilitates accurate tax reporting in future years.
Electronic Filing Requirements and Options
Partnerships with more than 100 partners must file Form 1065, Schedule K-1, and related forms electronically. The IRS may waive this requirement if the partnership demonstrates that electronic filing would create a hardship. To request a waiver, submit a written request to the Ogden Submission Processing Center before the filing deadline.
Partnerships with 100 or fewer partners may voluntarily file electronically. Electronic filing provides faster processing and earlier confirmation of receipt.
Final Considerations
Ensure all partnership information is accurate and complete before filing. Review the return for mathematical accuracy and consistency across all schedules. Verify that all partners receive their Schedules K-1 by the required deadline.
A general partner or LLC member manager must sign Form 1065. When a receiver, trustee, or assignee prepares the return on behalf of the partnership, the fiduciary must sign instead.
If errors are discovered after filing, prepare and file an amended return using Form 1065X for partnerships subject to consolidated audit procedures under sections 6221 through 6234. For partnerships not subject to these procedures, file an amended Form 1065 with corrected information and provide amended Schedules K-1 to affected partners.
By following this comprehensive checklist, partnerships can ensure compliance with all Form 1065 requirements for tax year 2013, minimize the risk of penalties, and provide partners with accurate information for their individual tax reporting obligations.
Need Help With Your Tax Filing?
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
We offer:
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Call now before filing: (888) 260-9441
Fast transcript pull available
This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
