What Is Form 1065: Definition, Criteria and Deadlines

Ensuring your business is firing on all cylinders and moving in the right direction can be incredibly challenging, especially when you have partners. That's before you attempt to navigate mountains of complex financial work, including Form 1065 the US Return of Partnership Income, that can get in the way of building your business.

If you own a partnership or are considering entering into one, use this guide to understand the utility of Form 1065, its requirements, and other information that will help make sure you always fill it out correctly and submit Form 1065 by the deadline. 

What Is Form 1065?

The IRS requires partnerships to file Form 1065, an information return. This type of return reports information to the IRS that partners would use for their personal returns.

Partnerships are pass-through entities, meaning they do not pay tax on their income. Profits or losses are passed through to each partner to address on their personal income tax returns. Partners must include partnership items on their individual tax returns or information returns.

What Information Is Needed to Complete Form 1065?

The IRS is interested in financial information about your partnership, including:

• Income 
• Gains
• Losses 
• Deductions 
• Credits

Certain portions of the form may be left blank, depending on the nature of your business. For example, if your business doesn't sell physical products, you would not need to attach tax Form 1123-A detailing the cost of goods sold along with your submission. 

Who Needs to File Form 1065?

If your business partnership is domestic and headquartered in America, you must complete and file Form 1065 annually. This applies to several business entities, which include:

• Limited partnerships 
• Limited liability company (LLC) partnerships with 2+ partners
• General partnerships

Religious organizations must also file IRS Form 1065, as well as foreign partnerships operating in the United States, although there are exemptions. 

Form 1065 Filing Deadline

For most partnerships, Form 1065 must be filed by a March 15 due date, with the exception of partnerships that do not follow the calendar year. Those partnerships must file Form 1065 on the 15th day of the third month following the end of their tax year. 

If your partnership requires a filing extension, file Form 7004. The IRS grants an automatic six-month extension unless the extension request is denied. The IRS will only notify your partnership if the extension is declined.

Partnerships with 100+ partners must file electronically, while partnerships with fewer than 100 partners have the option to e-file or submit materials by mail. 

Form 1065 Late Filing Penalties and Abatement

If you've missed the filing deadline, filing as soon as possible is in your best interest. Each partner will receive a monthly penalty for up to 12 months until Form 1065 is filed.

The IRS can waive your penalty entirely if you clearly show a reason for missing the deadline. This is called an abatement. You will have to provide evidence to the IRS that you were working in good faith to make the deadline but were delayed due to an issue outside of your immediate control.

Use Form 843 to request an abatement for your partnership. 

Form 1065 vs. K-1: How do they Differ?

Before your partnership can file Form 1065, a Schedule K-1 must be prepared for each partner. Your Schedule K-1 will show your portion of the partnership's income, losses, dividends, and capital gains, among other income and royalties you may have. Your Schedule K-1 will also be attached to your personal income tax return.

Form 1065 gives a snapshot of your entire business, while each Schedule K-1 is specific to each partner’s share of income and overall share of the partnership.

Partnership business owners may also have to attach other materials with their tax filings, including Schedule M-1, Schedule M-2, and Schedule M-3.

Work With Form 1065 Tax Experts

Accurately completing and filing Form 1065 is a complex, time-consuming process with a lot at stake. If an error is made or a deadline is missed, it impacts you, your partners, and your business. That's why many partnerships trust 1-800Accountant, America’s leading virtual accounting firm for small businesses, for their financial needs.

Whether it's business tax preparation, tax advisory, or any of our professional accounting services, we have the affordable pricing solutions you need to ensure your business remains tax-compliant.  Schedule a quick consultation – usually 30 minutes or less – to learn more.