What is Form 1065 (Partnership Return)?

Form 1065 is the annual return for US partnerships and multi-member LLCs (which are taxed as partnerships by default). Like the S-corp Form 1120-S, the partnership itself pays no federal income tax — profit flows to partners through Schedule K-1s, and partners pay tax on their respective shares.

**Who must file Form 1065**

- Domestic partnerships (general and limited) - Multi-member LLCs that have not elected C-corp or S-corp treatment - Foreign partnerships doing business in the US - Real estate investment groups with two or more owners

**Filing deadline**

- Calendar-year partnerships: 15 March (15th day of 3rd month after year-end) - Same as S-corp deadline — one month before the personal return deadline - 6-month automatic extension via Form 7004 (to 15 September)

**Schedule K-1 to partners**

Each partner receives a K-1 showing their distributive share of: - Ordinary business income or loss - Net rental income - Interest, dividends, royalties - Net short-term and long-term capital gains - Section 179 deduction - Self-employment income (for general partners and active LLC members) - Credits (R&D credit, investment credit, etc.)

General partners and active LLC members pay self-employment tax on their share of ordinary income. Limited partners and passive members generally do not.

**Late filing penalty**

$235 per partner per month (or partial month), up to 12 months. A 3-partner LLC filed 3 months late: $235 × 3 × 3 = $2,115.

**Guaranteed payments**

Payments to partners for services (similar to salaries) are called 'guaranteed payments.' They appear on the K-1 and are deducted on the partnership return. Guaranteed payments are subject to self-employment tax.

**Basis and at-risk rules**

Like S-corp shareholders, partners must track their basis (includes share of partnership debt, unlike S-corp where only direct loans count). Losses limited to basis and 'at-risk' amounts. Passive activity rules may further limit loss deductions for passive investors.