Roadmap to File Form 1065: Partnership Firms’ Income Tax Return

Where do you need to file Form 1065? Just like individuals and corporations, partnership firms and LLCs also have to file their income tax returns in the US. And just like others, the IRS has prepared a separate tax form for them; that is, Form 1065. 

It is the most important annual tax form for every partnership firm and they must file it before the deadline to save themselves from the penalties.

What is Form 1065?

Form 1065 also fulfills the same purpose as other tax return forms. It helps the partnerships and LLCs to report their income, gains, losses, credits, and deductions which are important to be considered while the tax returns. 

Who is supposed to file Form 1065?

Although these are the taxes filed by businesses, businesses do not pay these taxes themselves. In fact, the taxes are “passed through” the partners and shareholders. This means that even if it is profits or losses, it is on the partners and shareholders rather than the business itself. Therefore, the partners must include the partnership items on their forms as well.

All domestic partnerships, foreign partnerships (having income from the resources in the USA), LLCs (classified as partnership firms), and non-exempt non-profit religious organizations must file this form. 

How can you file it?

In order to file form 1065, the organizations must gather the following information:

  1. Important year-end financials such as P&L statements, opening, and closing balance sheets, etc.
  2. EIN or other valid Tax ID
  3. The number of partners/shareholders
  4. Incorporation/inception date of the organization
  5. Percentage of companies owned by the partners

These are the common information, rest you can get help from the experts.

Where to get it and when to file it?

The Form 1065 is easily available on the website of the IRS and can be taken from there. It can be filled both in softcopy and hardcopy. However, for an organization having more than 100 partners, an online method is suggested while other organizations can file it via mail.

The organizations are required to file the tax return by the 15th day of the third month after the tax year ends; that is, March 15. If it falls on a weekend or a public holiday, the deadline gets shifted to the next business day.

Penalty for not filing Form 1065

In case a firm fails to file this return, its partners are liable to pay a penalty of US $210 each month. Remember that this is applied for each partner which means that for two partners, the penalty will be US $420 for one month.

Moreover, the intentional delay or failure can lead to additional penalties levied by the IRS on the organizations.

The Final Remarks

It is suggested to get in touch with US tax experts who can guide you through the way as there are various schedules as well which need to be attached along with the form. Gathering the documents and information can already get hectic. However, with the help of experts, the pressure can be shared. Also, check out the guide on Form 1120s, in case you are an elected S-corp.

Written by – Priyanka Rampal


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