K-1 form received late?

K-1 form received late?

April 03, 2024

A question came up from a client: "What should we do if we receive a K-1 for 2023 after already filing our tax return?". This is actually a fairly common situation and is typically readily manageable. 

Firstly, what is a K-1?

A K-1 form is a federal tax document used to report income, losses, and dividends for various entities and individuals. Here are the key points about Schedule K-1:

  1. Purpose:

    • Schedule K-1 is used to report financial information from pass-through entities (such as partnerships, S corporations, trusts, and estates) to their partners, shareholders, or beneficiaries.
    • These entities do not directly pay corporate tax on their income; instead, they shift the tax liability (along with most of their income) to their stakeholders.
  2. Who Receives K-1s:

    • Business partners, S corporation shareholders, and investors in limited partnerships and certain exchange-traded funds (ETFs) use Schedule K-1 to report their earnings, losses, and dividends.
    • Each relevant individual (partner, shareholder, or beneficiary) receives a separate K-1 form.
  3. Reporting Details:

    • The K-1 form tracks each participant’s basis (ownership stake) in the enterprise.
    • It reports the participant’s share of the business entity’s gains, losses, deductions, credits, and other distributions (whether or not they’re actually distributed).
  4. Similar to Form 1099:

    • Schedule K-1 is similar to Form 1099 in that it reports dividends, interest, and other annual returns from investments.
    • Investments such as master limited partnerships (MLPs), real estate limited partnerships (RELPS), and certain ETFs routinely issue K-1s.
  5. Issuance Deadline:

    • Schedule K-1s should be issued to taxpayers no later than March 15 or the third month after the end of the entity’s fiscal year.

K-1 forms are unfortunately often sent out by entities after the deadline. 

If you receive a K-1 after already filing your taxes for 2023, here’s what you should consider:

  • No Changes: If the K-1 does not generate any changes in your refund or tax due from the original return, you typically do not need to file an amendment. In other words, if the K-1 doesn’t alter your tax situation, there’s typically no need to amend your return.

  • Received a Refund: If you’ve already received a refund based on your original return, you can wait until you receive the K-1. If the K-1 doesn’t impact your tax liability, no further action is typically necessary.

  • No Refund Yet: If you haven’t received a refund yet, you can file an extension using Form 4868 (Application for Automatic Extension of Time to File U.S. Income Tax Return).

Remember, it’s essential to assess whether the K-1 affects your tax situation before deciding whether to amend your return. If in doubt, consult a financial/tax professional to ensure compliance with IRS guidelines.