What is Form 1065?
Form 1065 is an IRS form used to report income, gains, losses, deductions and tax credits associated with partnerships.
How Does Form 1065 Work?
Let's say John Doe and Jane Smith operate a partnership that sells widgets. When tax time rolls around, they have their accountant fill out an IRS Form 1065 to report the partnership's net profits and tax liability, if any. The form also indicates what percentage of those profits, liabilities and expenses are associated with John's ownership and which are associated with Jane's.
Why Does Form 1065 Matter?
Form 1065 is part of IRS Schedule K-1. You may have heard of the K-1 -- it is the form that reports income from a partnership and is sent to the partners so they can include that income on their personal tax returns if necessary. This an important factor, because partnerships rarely are taxable -- their income usually flows through to the partners themselves.