Partnership Tax Return - Form 1065
Form 1065 is an information return used to report the income, gains, losses, deductions, credits, and other information from the operation of a partnership. A partnership doesn't pay tax on its income but passes through any profits or losses to its partners by Form K-1. It also has to withheld taxes from foreign (Nonresident Alien) partners to transfer them to the IRS. Partners must include partnership items on their individual tax return - Form 1040NR.
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A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. Unlike a partnership, none of the members of an LLC are personally liable for its debts. An LLC may be classified for federal income tax purposes as a partnership. In fact, a domestic LLC with at least two members that does not elect otherwise is classified as a partnership for federal income tax purposes.
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When To File
Generally, a domestic partnership must file Form 1065 by the 15th day of the 3rd month following the date its tax year ended. For calendar-year partnerships, the due date is March 15. You can file with us a request for an extension of time to file. The late filing penalty is $205 for each month or part of a month (for a maximum of 12 months) the failure continues, multiplied by the total number of persons who were partners in the partnership during any part of the partnership's tax year for which the return is due.
General Partner vs Limited Partner
A general partner is a partner who is personally liable for partnership debts. A limited partner is a partner in a partnership, whose personal liability for partnership debts is limited to the amount of money or other property that the partner contributed or is required to contribute to the partnership.
To avoid mistakes, the partnership should verify that it has the exact name and ITIN/SSN of its partners as the rocords of the IRS.