Although no one likes taxes, a partnership tax return checklist can help simplify and expedite your tax returns. The IRS defines a partnership as a “relationship existing between two or more persons who join to carry on a trade or business.”
People often join partnerships, instead of venture out alone because it allows for greater resources, skills-balancing, innovation, and helps to reduce individual costs. However, the actual partnership itself doesn't pay federal income tax.
Instead, the losses, income, credits, and deductions are passed through to the business owners, who report these amounts as a part of their income tax returns. Continue reading to learn more about a simple 5 step partnership tax return checklist that should simplify and expedite your tax returns.
While partnerships may not be taxed, each partnership must file a tax return every year unless the business has no expenses or income. Whether you operate as a limited partnership or as a general partnership, use the following five steps in the partnership tax return checklist to help you complete your return:
In the process of filing your partnership taxes, you'll most likely need to fill out Form 1065, Form 941, and Form K-1.
This form is used to report the gains, deductions, credits, and income resulting from a partnership. While you claim these items as part of your yearly income, you must file this form for verification purposes. To fill out this form properly, you need:
You may need to use this form to report social security tax, income taxes, or Medicare tax withheld from your employees' paychecks. You need to know the following to file it:
Each partner is responsible for filing their own individual tax return to report their share of losses, income, deductions, and credits reported on 1065 tax form. Then, the partnership should prepare a Schedule K-1 to report each partner's share of the returns. It lists:
Few truer statements exist then this one: “People don’t like taxes.” They’re confusing, they can sometimes feel like a rip off, and filing them incorrectly can land you in jail; just ask Al Capone. And, unsurprisingly, the added complexities of partnerships do little to generate that warm-fuzzy feeling. When it comes to filing taxes as a business partner, here are some quick facts:
While taxes are not the insurmountable beast we make them out to be, they truly are sources of great confusion. Adding an entrepreneurial spirit and a seemingly endless list of day-to-day business management tasks to the pile does little to lighten the load.
Fortunately, you don't have to do it alone! The experts at John F. Dennehy Jr. CPA, PC offer decades of experience helping partners save time and money with:
Let's talk more about what we can do help your partnership run more effectively. Contact John F. Dennehy Jr. CPA today.
We at John F. Dennehy CPA are a team of certified public accountants who service clients throughout Long Island. The services that we provide are comprehensive, and we can resolve multiple accounting needs for a client.