Notes on Filling Out Form 1065 for a Partnership (2023)

Overview of Form 1065

• Required for partnerships to report income, deductions, gains, losses, etc.
• LLCs with multiple partners must file this form.
• Can utilize tax software for filing, but also available on the IRS website.

Steps to Get Started

• Download Form 1065: Search for "Form 1065" on the IRS website.
• Instructions: Download and review the instructions for Form 1065.
• Schedule B and Schedule K-1: May need Schedule B-1 (if any partner owns 50% or more) and Schedule K-1 for each partner.

Part A: Principal Business Activity

• Business Code: Enter principal business activity code.
• Example: Retailer, Home and Living Products
  • Code: 445110 (General Merchandise Store)
• Verify business code validity if not the first year of filing.

Basic Information to Fill in Form 1065

• Partnership name and address (including state and ZIP code).
• Employer Identification Number (EIN).
• Date business started and total assets (refer to instructions).

Accounting Method

• Check the appropriate accounting method (Cash or Accrual).
• Changing accounting methods requires IRS approval (Form 3115).

Part 1: Income

• Gross Receipts or Sales: Record gross receipts from sales.
• Cost of Goods Sold (COGS): Report if inventory is maintained:
  • Use Form 1125-A to calculate COGS.

Inventory Data Preparation

• Prepare financial data in advance.
• Use worksheets to track inventory and sales.
• Example: Gross receipts totaled $2,596.

Cost of Goods Sold (COGS) Calculation

• Beginning Inventory + Purchases - Ending Inventory = COGS.
• Report in Form 1065 after completing Form 1125-A.

Part 2: Deductions

• Payroll Expenses: Use payroll records to fill appropriate lines.
• Guaranteed Payments: Report guaranteed payments to partners.
• Depreciation: Attach Form 4562 if applicable.

Summary of Deductions

• Ensure all deductions are summed correctly.
• Deduction types can include:
  • Salaries and wages
  • Rent
  • Repairs and maintenance
  • Bad debts
  • Amortization (if applicable)

Schedule K: Partner’s Share of Income, Deductions, etc.

• Line 1: Ordinary business income/loss from page 1.
• Enter specifics for other income types (interest, rental, royalties).
• Ensure that all allocations to partners are accurately represented.

Schedule K-1 Preparation

• Each partner's share of income and deductions goes on their Schedule K-1.
• Ensure correct coding for each type of income/deduction.
• Provide all necessary information about the partner's ownership.

Filing Requirements

• Paper filing is allowed but check if electronic filing is required based on partner numbers or conditions.
• Mail form to the appropriate IRS address based on the business location.
• Sign the form before mailing and keep copies for records.

Important Deadlines

• Form 1065 is due by March 15 for calendar year filers.

Additional Resources

• Use websites such as LiberDownload.com for templates and tracking sheets.
• Stay organized: Track business activities to simplify future filings.