Schedule K-1 is a tax document similar to a W-2 form. Partnerships, S Corporations, estates and trusts provide K-1 forms to partners and shareholders for filing their individual tax returns. Income and tax liabilities are passed through the corporation or entity to the taxpayer.
Schedule K-1 Form 1065
Partnerships must distribute a Schedule K-1 Form 1065 to its partners. Income or loss from the partnership is passed through to the individual partner where it is added to total income on Form 1040. Page two of the K-1 gives a breakdown as to where each line item should be reported on the partner's tax return.
Schedule K-1 Form 1120S
S Corporations are required to distribute a Schedule K-1 Form 1120S to its shareholders. Profit or loss is reported on the K-1 and shareholders are taxed by including the amount on their personal income tax returns. The K-1 schedule shows where to put each item on Form 1040.
Schedule K-1 Form 1041
Estates and trusts report income, deductions and credits to beneficiaries on a Schedule K-1 Form 1041. Beneficiaries must report the K-1 income on Form 1040, where it is included in total income and taxed accordingly. Page two of the K-1 gives instructions as to where each line is reported on the 1040.