As a pass through entity, a partnership will pass gain, loss, deduction, credits and other items through to the partners. These items are reported on Schedule K1. Each partner will receive a K1 and these K1s are forwarded to the Internal Revenue Service and thus the IRS is aware of the pass through items the partner(s) should reported on their applicable tax returns.
The treatment of an item is determined at the partnership level and then passed through appropriately. Thus, the K1 is an informational return whereby the partner receives information to report on their tax return and the IRS receives the items and information that each taxpayer should be reporting.
Please feel free to contact The McGuire Law Firm to discuss your individual and business tax questions with a tax attorney. The McGuire Law Firm provides a free consultation to all potential clients and would welcome the opportunity to meet with you. As a tax attorney, Mr. McGuire has assisted many individuals and businesses with their tax issues, matters and questions and continues to consult such individuals and businesses. The video below is to provide additional information regarding a K1 from a partnership, and hopefully, you find it useful and informative.