Subchapter S corporations (“Sub S”), partnerships, limited liability companies (“LLC’s”) and estates and trusts issue form K-1s. This form documents the stockholders, partners, members or beneficiaries share of their profit or loss from the entity. Don’t wait for this form to get started on your income tax return.
1) K-1s Aren’t Due Until March 15th
All form K-1s are not due until March 15th. If the Sub S corporation files an extension however, then the K-1 does not have to be issued until September 15th. This April 15th due date makes it very challenging for taxpayers. Their individual income tax return is due the same day. You can’t file your individual income tax return without your K-1s.
2) We Are Seeing More Amended K-1s
Investing in limited partnerships, particularly oil and gas that issue K-1s has become popular again. Just like amended 1099 forms, we have seen an uptick in the amount of amended K-1s last year. The changes on the amended K-1 may or may not be material.
Either way, your CPA will need to review the amended K-1.
3) Let Your CPA Get Started on Your Tax Return
This is key. Get all of your other tax material you have to your CPA. Let them get started. They can rough out the return. This will give you a sense of where you are at. Get the heavy lifting done up front. If you are timely your CPA should have the return good to go. Just add the information from the K-1 and the return should be complete.
4) You May Have to Go on Extension
The 2022 individual income tax return, Form 1040, is due on April 18, 2023. If you can’t file on time because you did not receive your K-1 timely, you will need to file an extension. This is done on Form 4868, Application for Automatic Extension of Time to File U.S. Income Tax Return. A properly filed extension request will extend the due date to file until October 15, 2023. The extension only extends the time to file the return. It does not extend the time to pay any tax due. Any tax due needs to be paid by April 15th. Failure to pay the tax then will result in interest and penalty.