Partnership Income Tax Guide

This guide will take you through the top pieces of information to help you prepare for partnership taxes, including types of partnerships and how they are taxed, when and where to file, and which form to use.

We'll also look at how the partnership's taxes are transferred to, and paid by, the partners.

Note

Partnership taxes are complicated, but you can make the process easier, and maybe less costly, by understanding the basics. Read more about Getting Help with Business Taxes.

Partnership Tax Return Due Dates

The due date for income taxes for partnerships and multiple-member LLCs taxed as partnerships is March 15. If March 15 falls on a weekend or holiday, the return is due the next business day.   Check this article about business tax due dates for the current year to get the exact date.

Note

In 2021, those affected by winter storms in Texas, Louisiana, and Oklahoma are automatically eligible to delay filing returns until June 15. This applies to both individual and business taxes, including any business taxes that otherwise would have been due March 15, 2021. Taxpayers in other areas have until May 17, 2021, to file their federal 2020 taxes, but this applies to individuals only, not businesses.

You may file your partnership return electronically, but partnerships with more than 100 partners are required to file Form 1065, Schedule K-1, and other related forms and schedules electronically.  

What's New With Partnership Income Taxes?

The 2017 Tax Cuts and Jobs Act had multiple changes that can affect your partnership income tax return beginning in 2018 and beyond. Some of the major changes that could affect your partnership are:

• Allowing more small businesses to use the cash accounting method instead of accrual accounting
• Increased write-offs for depreciating business assets like equipment and vehicles
• Elimination of tax-loss carrybacks (but net operating losses can still be carried forward to future years)
• Elimination of entertainment expense deductions, though meal expense deductions are still available, most at 50%  

New Qualified Business Income Deduction

A new Qualified Business Income Deduction allows partners to take a deduction for up to 20% of their portion of business income, in addition to other normal business deductions.   This new deduction has many limits and qualifications, so check with your tax professional to see if you qualify.

Note

Partnerships don't get the deduction; it passes through to the partners, based on their share on their individual Schedule K-1.

Partnership Federal Income Tax Forms

Partnerships file their federal income tax returns using Form 1065. This is an information return, meaning that no tax is imposed directly on the partnership based on information in Form 1065.

The partnership must also prepare a Schedule K-1 to give to each partner, showing that partner's distribution of the taxable profits or losses of the partnership for that year.

The Schedule K-1 is filed with the individual partner's personal income tax return for the year, and the total from the Schedule K-1 is recorded on Line 12, Business Income. Individual partners pay income taxes on their share of the profits from the partnership.

Information and Documents Needed for Partnership Tax Return

To file your partnership income taxes, you will need to provide some financial reports and other documents to your tax preparer. These documents include:

• A balance sheet for the beginning of the partnership's fiscal year and the end of that year
• A profit-and-loss statement for the end of the year
• Information to calculate the cost of goods sold

Filing an Extension for Partnership Income Taxes

To file an application to extend your partnership tax return, you must use Form 7004. This form must be filed by March 15, and taxes (estimated) must be paid by that date. You have six months to file the return, which is due September 15.

If you were affected by winter storms in Texas, Louisiana, or Oklahoma in 2021, you do not need to file an application to extend—as long as you file your taxes by June 15. If you want to delay filing until September 15, you will need to request an extension.

Note

If you file an extension, you must still pay the income tax by the original due date; payment is not extended.  

Filing an Amended Partnership Tax Return

To file an amended partnership return, make a copy of the partnership return Form 1065, and check the box G(5) on page 1. Attach a statement with details on what is being changed.

If the Schedule K-1 (partner or LLC member statement) is incorrect, check the "Amended K-1" box on the top of the Schedule K-1 to indicate that it has been amended.  

Estimated Taxes for Partners in Partnerships

The partnership itself pays no income tax, so it doesn't pay estimated taxes. A partner may have to pay estimated taxes if they expect to owe $1,000 or more in taxes when their return is filed.

Quarterly estimated tax due dates are usually April 15, June 15, September 15, and January 15 (of the following year). You may pay estimated taxes by check (with a voucher) or by direct pay.

Note

As with filing tax returns, those affected by winter storms in Texas, Louisiana, or Oklahoma in 2021 may delay paying quarterly estimated taxes until June 15, 2021.

State Partnership Taxes

Partners must pay income taxes on their distribution of profit in a partnership in the state or states where the partnership is located. Partnership taxes are paid on the individual partner's personal state tax returns.

Don't Forget Self-Employment Taxes

General partners in a partnership are not considered employees but are self-employed. Their income as a partner may be subject to self-employment taxes (Social Security and Medicare taxes), based on the partnership type.

General partners usually pay self-employment tax on their earnings (with some exceptions), but a limited partner's share of partnership income isn't subject to self-employment taxes. (There are exceptions there, too.)

If you must pay self-employment tax, you must prepare and file a Schedule SE to report your partnership income and calculate the self-employment tax amount. This tax amount is added to your personal tax return.

Husband-Wife Partnerships as Qualified Joint Ventures

If you and your spouse are the sole owners of a partnership (not an LLC), you may be able to elect qualified joint venture status and file two Schedule C forms instead of filing the partnership tax form.

You don't need to file an election to do this, but you must meet certain specific qualifications. Both members must materially participate, there must be no other owners, and they must file a joint tax return.

The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

1. Internal Revenue Service. "Instructions for Form 1065," Page 4. Accessed April 12, 2021.
2. Internal Revenue Service. "Tax Relief in Disaster Situations," Select "2021." Accessed April 12, 2021.
3. IRS. "Tax Day for Individuals Extended to May 17: Treasury, IRS Extend Filing and Payment Deadline." Accessed April 12, 2021.
4. Internal Revenue Service. "Modernized e-file (MeF) for Partnerships." Accessed April 12, 2021.
5. Internal Revenue Service. "Tax Cuts and Jobs Act: A Comparison for Businesses." Accessed April 12, 2021.
6. Internal Revenue Service. "Publication 535 Business Expenses," Page 5. Accessed April 12, 2021.
7. Internal Revenue Service. "Instructions for Form 1065," Page 2. Accessed April 12, 2021.
8. Internal Revenue Service. "Partner's Instructions for Schedule K-1 (Form 1065)," Page 1. Accessed April 12, 2021.
9. Internal Revenue Service. "Instructions for Form 7004," Page 1. Accessed April 12, 2021.
10. Internal Revenue Service. "Victims of Texas Winter Storms Get Deadline Extensions and Other Tax Relief." Accessed April 12, 2021.
11. Internal Revenue Service. "Extension of Time to File Your Taxes." Accessed April 12, 2021.
12. Internal Revenue Service. "Instructions for Form 1065," Page 7. Accessed April 12, 2021.
13. Internal Revenue Service. "Estimated Taxes." Accessed April 12, 2021.
14. Internal Revenue Service. "Pay As You Go, So You Won’t Owe: A Guide to Withholding, Estimated Taxes, and Ways to Avoid the Estimated Tax Penalty." Accessed April 12, 2021.
15. Internal Revenue Service. "Instructions for Form 1065," Page 40. Accessed April 12, 2021.
16. Internal Revenue Service. "Election for Married Couples Unincorporated Businesses." Accessed April 12, 2021.

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