• Note:  Some brokers now issue a Schedule K-1 for IRAs (Form 1065 Box 12 is checked).  Such IRA K-1 forms can be ignored like any IRA statement (and thus any unusual items don’t make the return out-of-scope).  You should see that the Partnership’s TIN in Box E is not the taxpayer’s SSN, but the partnership’s EIN, and the Box F name usually includes “IRA” or “CUSTODIAN”.
  • If a Schedule K-1 form includes anything other than interest, dividends, royalties, capital gains/losses (incl. Section 1250 gains), estate tax deduction, taxes paid, and associated foreign tax credits, then the return may be out-of-scope.  However, a few other items may be disregarded.
        • Note: Refer to pp. D-60 thru D-62 of Pub 4012 online for specifics contrary to the IRS print version.
    • Pre-paid funeral/burial plans that report using a Schedule K-1 will be in-scope, because of their limited income and expense categories.
    • If box 14 has code “E” in it, the amount is for information purposes only and can be ignored. (If it were relevant, the return would already be out-of-scope because the taxpayer’s income was too high.)
    • Box 19, Distributions, is an information-only field; any amount in this field should be ignored. 
    • More and more mutual funds are being reported on a Schedule K-1 form instead of a 1099-B.  Many of these have business income/loss or other out-of-scope items.  Advise the taxpayer that we can’t file their return in any year that they hold such mutual funds in a taxable account.  Many account owners are unaware that they own mutual funds that are reported on a K-1, and unaware that they could sell that fund and invest in a different, similar fund that isn’t reported on a K-1.  They should consult their broker.
  • Income reported on a Schedule K-1 is done on three different pages, all accessed from the Schedule K-1 page [Income > Other Income > K-1 Earnings]. The three pages (in order) are:
    • Partnerships (Form 1065)  (this is by far the most common form)
      • Note: If the end-of-year capital account on the form is negative, then the return is out-of-scope
    • S-corporations (Form 1120S) 
    • Trusts and estates (Form 1041) (only some parts are out-of-scope)
  • In TaxSlayer, for partnerships and S-corporations, when completing Part 1 – Information, check the “All Investment is At-Risk” box.
  • The fiscal year of a partnership or S-corporation, stated on a K-1 form, may not cover a calendar year. For example, a partnership's tax year might end on February 28, 2023. In that example, all amounts on that K-1 form should be reported on the taxpayer’s 2023 tax return, even though most of the tax year was in calendar year 2022.
  • If the K-1 form lists royalties, then after completing the TaxSlayer page for entering K-1 income, TaxSlayer will ask which Schedule E should be associated with the income from royalties.
    • If no Schedule E exists, TaxSlayer offers to create one. For details on doing so, see section Schedule 1, Line 5 - Rental Real Estate and Royalties on page 63.
      • If no Schedule E is created before starting the E-file section, TaxSlayer will display an error that a Schedule E is missing.
  • If the K-1 form lists foreign taxes paid, enter that amount on the Form 1116 - Foreign Tax Credit page [Deductions > Credits Menu > Foreign Tax Credit].
    • If there is more than one K-1 form showing foreign taxes paid, enter only the total amount.
    • An amount entered on the Form 1116 - Foreign Tax Credit page will go to Schedule 3 Line 1, Foreign Tax Credit, on Form 1040, as discussed on page 90. If the total from all forms seems likely to exceed $300 ($600 if MFJ), please see that discussion.
      • If foreign taxes were included on one or more Form 1099-INTs or 1099-DIVs and entered in TaxSlayer along with other information on those forms, do not enter the same amounts again on Form 1116 – TaxSlayer will automatically add those amounts to come up with the full total for Schedule 3 Line 1.
    • Note: Form 1116 is one of ten for which a PDF can be created from a menu page within the return.

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