Partnership Tax Preparation
If don’t know anything about partnership tax preparation, this page contains all the necessary information required to file partnership taxes. Federal income tax is not applied to partnerships. The partnerships’ income, deductions, credits, and losses pass reported by the partners themselves. They pay taxes like an individual.
Since partnerships don’t pay taxes, the partners must file a Tax Return each year. The Tax Return shows the partnerships’ total revenue, credits, and deductions. Partnerships should also prepare a complete list showing each one’s business share income or loss. They might also need to pay particular state taxes and file state Tax Returns.
Whether it’s a partnership or a general partnership, you’ll need to follow the same procedure to file business taxes. But limited partners face a slightly different Tax Treatment compared to general partners.
Below are some important steps you will need to keep in mind while filing Business Taxes for partnership;
Prepare a Federal Partnership Tax Return
It’s recommended that every firm with multiple partners must prepare a Federal Partnership Tax Return on IRS form 1065. This particular form talks about the partnership’s total revenue and loss. You’ll need to list deductions including rent, salaries, payments to partners, taxes, employee benefit programs, depreciation, and taxes. Apart from deductions, your partnership’s total revenue is its business revenue or income.
Compose Schedule K-1
Partnerships are usually required to prepare a Federal Schedule K-1, partner’s deductions, shares of income and credits. It applies to each person who was involved in any business as a partner during the Tax Year.
This form consists of partner’s address, shares of profits, liabilities, capital, and losses. It also lists share of business loss or income, interest income, rental income, credits, self-employment, and distributions. After completing Schedule K-1, send a duplicate copy to each of your partners that they can use to prepare their own personal Tax Returns.
File Form 1065 & Copies of K-1 Forms
All the partnerships operating in the US must file form 1065 together with the copies of K-1 forms. The last date for filling the form 1065 is April 15. You can file these forms either by mail or electronically.
File Your State Tax Returns
Since every state has its own rules, you should browse your state’s requirements online prior to filing any tax return. Your state could require partnerships to file a State Tax Return.
File Your Personal Tax Returns
Whether you’re a general or limited partner, you need to report your percentage of partnership income on Federal Tax Return. The K-1 form you receive contains all the information necessary to do this.
Furthermore, if you’re a General Partner, your partnership revenue will normally be considered self-employment revenue or income. You’ll need to report this on your Personal Tax Forms and estimate your self-employment tax income.
We at Green Tree Tax offer all-inclusive partnership tax preparation services at a very affordable price you can’t resist. Contact us now!