Quick answer: A Schedule K-1 is a tax form that reports your share of a business’s income, deductions and credits when you own part of a partnership, multi member LLC or S corp, or inherit income from a trust or estate. The business does not pay income tax on that profit. You do, on your personal return, whether or not you received any cash.
If you just got your first K-1, it can look like a wall of boxes and codes. This guide explains what it is, why your numbers may not match your bank account and exactly what to do with it.
What is a K-1, in plain English?
Partnerships, multi member LLCs and S corps are “pass through” businesses. They file a tax return but usually pay no federal income tax. Instead, the profit passes through to the owners.
The Schedule K-1 is the slip that tells each owner their piece. Think of it as a W-2 for business owners, except it reports a share of profit instead of a paycheck.
- The business prepares it and sends one copy to you and one to the IRS.
- You do not fill it out. You copy its numbers into your own return.
- It covers one tax year and arrives after that year ends.
The three types of K-1 and who gets them
| K-1 type | Comes from | Who receives it | Personal tax notes |
|---|---|---|---|
| Schedule K-1 (Form 1065) | Partnerships and LLCs with two or more owners | Partners and LLC members | Active owners usually owe self employment tax on their share |
| Schedule K-1 (Form 1120-S) | S corporations, including LLCs taxed as S corps | Shareholders | No self employment tax; owners who work in the business are paid a W-2 salary too |
| Schedule K-1 (Form 1041) | Trusts and estates | Beneficiaries | Covers only income the trust or estate distributed or must distribute |
A one owner LLC and a C corporation do not issue K-1s. A single member LLC reports on Schedule C, and C corp owners receive a 1099-DIV for dividends. Not sure what an S corp is? Start with What Is an S Corp?.
Investors: Invested in a publicly traded partnership, a real estate fund or a startup set up as an LLC? You can get a K-1 even if you never work in the business. These often arrive late.
K-1 vs W-2 vs 1099: what is the difference?
| Schedule K-1 | W-2 | 1099-NEC | |
|---|---|---|---|
| Who gets it | Owners and beneficiaries | Employees | Independent contractors |
| What it reports | A share of profit, losses and credits | Wages paid | Fees paid for services |
| Taxes withheld | None | Yes | None |
| Social Security and Medicare | Depends on K-1 type | Withheld from pay | Self employment tax on Schedule SE |
| Due to you by | March 15 or later | January 31 | January 31 |
S corp owners often get both: a W-2 for their salary and a K-1 for the remaining profit. Our guide on how to pay yourself as a business owner explains how the two fit together.
When are K-1s due, and what if yours is late?
- March 15, 2027Partnership (Form 1065) and S corp (Form 1120-S) returns and K-1s are due, unless the business extends.
- April 15, 2027Trust and estate returns (Form 1041) and K-1s are due. Also the deadline to file your personal return or an extension, and to pay what you owe.
- April 15, 2027Virginia Form 502 and owner Schedules VK-1 due for calendar year pass through businesses.
- May 1, 2027Virginia individual returns (Form 760) are due.
- September 15, 2027Extended partnership and S corp returns and K-1s are due.
- September 30, 2027Extended trust and estate returns and K-1s are due.
- October 15, 2027Extended personal returns are due. A K-1 that arrives in September leaves you about one month.
What to do if your K-1 has not arrived
- Ask the business for an expected date and a rough income estimate.
- File a personal extension (Form 4868) by April 15 and pay an estimate of the tax you owe. It extends the time to file, not to pay.
- File your return once the K-1 arrives. Filing without it often leads to an amended return.
How to read the key boxes on a K-1
Most of a K-1 is blank for a typical small business owner. These are the lines that matter most:
| What to look for | Partnership K-1 (Form 1065) | S corp K-1 (Form 1120-S) |
|---|---|---|
| Your ownership share | Part II, Item J | Part II, Item G |
| Ordinary business income or loss | Box 1 | Box 1 |
| Rental real estate income | Box 2 | Box 2 |
| Guaranteed payments to you | Box 4 | Not used (owners get a W-2) |
| Interest, dividends and capital gains | Boxes 5 to 9 | Boxes 4 to 8 |
| Self employment earnings | Box 14 | Not used |
| Distributions you received | Box 19 | Box 16, code D |
| Pass through deduction (QBI) information | Box 20, code Z | Box 17, code V |
Tip: Codes and footnotes matter. A letter code next to a box tells you or your software where the number goes. If a statement is attached, keep it with the K-1; it often holds the QBI and state details.
How K-1 income is taxed on your personal return
- Income tax: most business K-1 income goes on Schedule E, Part II, then into your total income on Form 1040. Interest, dividends and gains go on their usual schedules.
- Self employment tax: active partners and LLC members usually pay 15.3% self employment tax on their share of business profit and guaranteed payments. S corp K-1 income is not subject to it.
- Pass through deduction: eligible owners may deduct up to 20% of qualified business income. This deduction was made permanent in 2025.
- Net investment income tax: passive investors with higher incomes may owe an extra 3.8% on K-1 income from businesses they do not work in.
- No withholding: nothing is withheld from K-1 income, so many owners make quarterly estimated tax payments to avoid penalties.
Why your K-1 does not match the cash you received
This is the number one K-1 surprise. You are taxed on your share of the profit the business earned, not on the money it paid you.
Profit kept in the business is still taxed to you, which is why many partnership agreements call for “tax distributions” so owners can cover the bill.
Basis: the number that decides losses and distributions
In short: Basis is roughly what you have put into the business plus your share of its profits, minus your share of losses and the distributions you have taken out. You need enough basis to deduct losses and to take tax free distributions.
| Simple basis example (S corp owner) | Amount | Running basis |
|---|---|---|
| Cash you invested to start | $10,000 | $10,000 |
| Plus: your share of profit (K-1 Box 1) | +$50,000 | $60,000 |
| Minus: distributions you took | −$45,000 | $15,000 |
| Ending basis, carried to next year | $15,000 |
- The business does not track your basis for you. It is your number, and you should keep a running record every year.
- S corp owners file Form 7203 with their return when they claim a loss, take a distribution, sell stock or are repaid a loan.
- Partners include their share of the partnership’s debts in basis. S corp owners do not, even if they personally guarantee a business loan. Only loans you make directly to the S corp count.
- Distributions above basis are usually taxed as a capital gain.
Can you deduct a loss on your K-1?
Sometimes. A K-1 loss has to pass up to four tests, in this order, before it lowers your taxes:
- Basis: you can only deduct losses up to your basis. The rest carries forward.
- At risk rules: limited to what you actually have on the line (Form 6198).
- Passive activity rules: if you do not materially participate, losses usually only offset other passive income (Form 8582).
- Excess business loss limit: very large losses above a yearly cap carry forward.
Suspended losses are not lost. Track them for use in a later year or when you sell. Rental owners can read more in our guide to Schedule E for rental property.
Virginia Schedule VK-1: the state version
- Who issues it: partnerships, LLCs and S corps that file Virginia Form 502 give each owner a Schedule VK-1 along with the federal K-1.
- What it shows: your Virginia share of income, Virginia additions and subtractions, and credits such as the pass through entity tax credit and any tax withheld for nonresident owners.
- When it is due: Form 502 is due on the 15th day of the fourth month after year end, which is April 15 for calendar year businesses.
- Owners in other states: a Virginia business with owners in Maryland or DC may need to withhold Virginia tax for them. See our DMV multi state tax guide.
Keep the VK-1 with your federal K-1. Your Virginia return needs both.
K-1 FAQs
Do I have to pay taxes on a K-1?
Usually yes. You pay income tax on your share of the profit shown on the K-1, even if the business kept the cash. If the K-1 shows a loss, you may be able to deduct it, subject to the basis and other loss limits.
Is K-1 income the same as W-2 income?
No. W-2 income is wages with taxes already withheld. K-1 income is your share of business profit, with nothing withheld, which is why many owners make quarterly estimated tax payments.
Are K-1 distributions taxable?
Generally not, as long as they do not exceed your basis in the business. You are taxed on the profit, not the cash you take out. Distributions above your basis are usually taxed as a capital gain.
When should I receive my K-1?
For a calendar year partnership or S corp, by March 15. If the business files an extension, it can be as late as September 15. Trust and estate K-1s are tied to the April 15 due date, or September 30 with an extension.
What if my K-1 is late?
Do not guess. File an extension for your personal return by April 15 and pay an estimate of what you owe. Filing without the K-1 often leads to an amended return later.
Does a single member LLC get a K-1?
Not under default tax rules. A one owner LLC reports profit on Schedule C. It only issues a K-1 if it elects to be taxed as an S corp.
Does K-1 income count for self employment tax?
It depends on the type. Partners and LLC members who are active in the business usually pay self employment tax on their share. S corp K-1 income does not carry self employment tax, because owners pay payroll tax on their salary instead.
What is the Virginia Schedule VK-1?
It is the Virginia version of the K-1. A business that files Virginia Form 502 gives each owner a VK-1 showing the Virginia share of income, adjustments and credits, such as the pass through entity tax credit.
Help with K-1s on both sides
Our Ashburn team prepares the business returns that issue K-1s and the individual returns that report them, so the numbers match and basis is tracked year to year. Thinking about S corp status for your own business? See our S corp election service.
This article is general information and not tax advice for your situation. Tax rules change, so talk with a qualified professional before making decisions.
