The term Schedule K-1 equivalent refers to the state-specific version of a federal Schedule K-1 form. It's important to compare your K-1 equivalent with your federal K-1 and report any discrepancies. If you receive a Schedule K-1 equivalent from a state where you don't live, you may need to file a nonresident tax return for that state.
Schedule K-1s and Equivalents
Partnerships, S corporations and trusts send a Schedule K-1 to shareholders, beneficiaries and partners. One copy of the Schedule K-1 is sent to the taxpayer and another copy is sent to the IRS.
The schedule notes the exact amount of income, deductions and credits the taxpayer received from the entity. These numbers can be derived from percentage of ownership -- for example, an individual who owns 50 percent of a partnership may receive 50 percent of profits and losses -- or they can be allocated by another method that the entity uses.
Partnerships, S corporations and trusts can also report this information at the state-level using a Schedule K-1 equivalent. Each state uses a different number or name to identify the form. For example, California reports the information on Form 568, and Oregon uses the Oregon Schedule K-1.
Implications of Receiving a Schedule K-1 Equivalent
Schedule K-1 Equivalents for Your State of Residence
If you receive a Schedule K-1 equivalent for the state that you live in, there's not much that you need to do. The information on your state Schedule K-1 equivalent should match the information on your federal K-1, so you report the same amount on both your state and federal tax returns.
Nonresident Schedule K-1 Equivalents
If you receive a Schedule K-1 equivalent from another state, you may have more work ahead of you. This is referred to as a nonresident Schedule K-1. TurboTax explains you may need to file a nonresident tax return for that state to report the income from a nonresident Schedule K-1.
Whether or not you need to file a nonresident state tax return depends on how much income was sourced from the state and that state's policies. Talk to a tax professional or consult the state's Department of Revenue for more information.
Discrepancies With Your Schedule K-1 Equivalent
Compare your state Schedule K-1 equivalent with your corresponding federal Schedule K-1. If the two forms don't match, alert the entity that sent you the K-1s and ask for a corrected form. If the entity is unable or unwilling to correct the K-1, alert the IRS by filing Form 8082, Notice of Inconsistent Treatment or Administrative Adjustment Request.
Note the amount of the discrepancy and explain why it's incorrect. Report the correct amount on both your federal and state returns.