Schedule K-1 is used to distribute the net profit/loss to shareholders or partners based upon the percentage of stock or how the partnership agreement reads. Also, if a trust didn’t pay the income tax on their earnings it may be passed through to the beneficiaries on a Schedule K-1.
To enter amounts from Schedule K-1 into an individual tax return, from the Main Menu of the Tax Return (Form 1040) select:
- Income
- Rents, Royalties, Entities (Sch E, K-1, 4835, 8582)
- K-1 Input
- Select New or double-click the entry you wish to Edit. Select Pull if you prepared the return using the software in the previous year and wish to pull the data forward.
- Select Form 1065, Form 1120S, or Form 1041– The Schedule K-1 entry screens are designed to follow the Schedule K-1 for each entity.
- Fill in the company information and answer the questions on the screen
- Enter the information from the Schedule K-1. The line numbers on the Schedule K-1 entry screen correspond to the box numbers on the paper Schedule K-1.
NOTE: Be sure to correctly designate Passive or Non-passive income under Ordinary Income or Loss from Trade or Business Activities.
Passive Income is income from business activities in which the taxpayer does not materially participate, and all rental activities (except those of qualified real estate professionals).
Non-Passive Income is active income, such as wages, tips, and profits from your business that you materially participate in.
Some amounts entered in the Schedule K-1 screen will not directly transfer to the Form 1040. For these amounts, you will have to find the form or schedule the amount should be entered on and manually fill out that form. Refer to the instructions below to find where these amounts should be entered.
NOTE: This is a guide on entering a Schedule K-1 into the Keystone Tax Solutions Pro program. This is not intended as tax advice.
Additional Information:
Form 1040 – Schedule K-1 (Form 1065) Overview – For information and links on entering specific items on the Schedule K-1 (Form 1065) into Keystone Tax Solutions Pro.
Instructions for Form 1065 – Partner’s Share of Income, Deductions, Credits, etc.
Form 1040 – Schedule K-1 (Form 1120S) Overview – For information and links on entering specific items on the Schedule K-1 (Form 1120S) into Keystone Tax Solutions Pro.
Instructions for Form 1120S – Shareholder’s Share of Income, Deductions, Credits, etc.