If you run a business partnership, you’ve probably asked yourself: what is a 1065? IRS Form 1065, U.S. Return of Partnership Income, is the cornerstone of federal tax reporting for partnerships. Unlike corporations that file and pay their own taxes, partnerships are “pass-through” entities. This means partnership income, losses, deductions, and credits flow through to individual partners and get reported on their personal income tax returns.
Form 1065 gives the IRS a complete picture of your partnership’s financial information for the year. The form is then used to prepare each partner’s Schedule K-1, which shows their share of income from the business. Remember, while federal guidelines form the foundation of partnership taxation, state-specific requirements matter just as much. In this guide, we’re walking partnership business owners through everything they need to know about tax form 1065 for the 2026 filing season.
Key Takeaways
- Form 1065 is an information return—partnerships don’t pay taxes at the entity level, but pass income through to partners via Schedule K-1.
- Domestic business partnerships, multi-member LLCs, limited liability partnerships, and certain foreign partnerships must file Form 1065 annually.
- The deadline for calendar-year partnerships is March 16, 2026 (for tax year 2025), with a six-month extension available through Form 7004.
What Is IRS Form 1065?
IRS Form 1065 is the annual partnership tax return used to report your business’s financial performance to the federal government. Many partnerships file this form each year to document ordinary business income, expenses, gains, losses, and deductions or credits.
Here’s the key distinction: Form 1065 is an information return, not a tax-paying return. The partnership itself doesn’t owe federal income tax. Instead, all taxable items pass through to partners based on their ownership percentage (as outlined in your operating agreement). Each partner then reports their allocated share of income on their personal tax return using Schedule K-1.
This pass-through structure differs from sole proprietorships (which report business income directly on Schedule C) and C corporations (which pay taxes at the entity level). For small business owners in a partnership or multi-member LLC, understanding this filing process is essential for accurate tax reporting.
Who Needs to File a Partnership Tax Return?
Let’s start with the basics. Here’s everything you need to determine whether your business must file Form 1065:
Domestic Business Partnerships
If your partnership is headquartered in the United States, has at least two members, and receives income or incurs deductible expenses, it must file Form 1065 annually.
This requirement applies to general partnerships, limited partnerships, limited liability partnerships, and limited liability companies (LLCs) classified as partnerships for tax purposes. Even if your partnership doesn’t generate a profit, filing Form 1065 documents your financial activities for the IRS. Joint ventures that operate as partnerships also fall under this requirement.
Foreign Partnerships
Filing requirements shift slightly for foreign partnerships operating within the United States. A foreign partnership with U.S.-based trade, business income, or income sources must generally file Form 1065.
This remains true even when all partners are foreign persons and the partnership’s principal place of business is outside the U.S. There are two narrow exceptions where a foreign partnership might not need to file:
Exception 1: Certain foreign partnerships with only a small amount of U.S.‑source income and minimal allocations to U.S. partners may be exempt from filing if they meet all conditions listed in the latest Form 1065 instructions. Always confirm the current dollar and percentage thresholds in those instructions.
Exception 2: The partnership has met all filing requirements for other U.S. tax forms Forms 1042 and 1042-S and fully satisfied their partners’ tax liability related to U.S. income.
Religious or apostolic organizations exempt from income tax under Section 501(d) face unique reporting requirements. These organizations must still file Form 1065 to report taxable income, which is then allocated to members as a dividend.
Who Doesn’t Need to File?
Not every business structure requires Form 1065. Single-member LLCs are treated as disregarded entities and report business income on the owner’s individual tax return (typically Schedule C). Sole proprietorships follow the same approach. If your LLC has elected to be taxed as an S corporation or C corporation, you’ll file Form 1120-S or Form 1120 instead.
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How to Complete Form 1065: A Section-by-Section Guide
Form 1065 spans five pages plus various schedules. Here’s what you’ll need to complete form 1065 accurately:
Page 1: Basic Business Information
The first page captures your partnership’s identifying details and income statement summary:
- Partnership name, address, and employer identification number (EIN)
- Principal business activity and product or service
- Date the business started
- Accounting method (cash, accrual, or other)
- Total income, deductions, and ordinary business income (or loss)
You’ll also indicate whether this is an initial return, final return, amended return, or a standard annual filing. One partner or LLC member must sign at the bottom.
Schedule B: Other Information (Pages 2-3)
Schedule B asks technical yes/no questions about your partnership structure. Topics include ownership percentages, foreign partners, related party transactions, and whether the partnership is subject to the centralized audit regime.
This section also determines whether you must complete Schedules L, M-1, and M-2. Small partnerships meeting certain thresholds (under $250,000 in receipts and under $1 million in assets) may skip these schedules.
Schedule K: Partners’ Distributive Share Items (Page 4)
Schedule K summarizes all partnership items that pass through to partners. Categories include:
- Ordinary business income (or loss)
- Net rental real estate income
- Interest, dividends, and royalties
- Capital gains and losses (may require Form 4797 for property sales)
- Section 179 deductions
- Self-employment earnings
- Foreign transactions
- Alternative minimum tax items
This information flows directly to individual partners’ Schedule K-1 forms.
Page 5: Balance Sheet and Reconciliation Schedules
The final page includes three important schedules:
Schedule L is a balance sheet showing partnership assets, liabilities, and capital at the beginning and end of the tax year. Your financial statements should support these figures.
Schedule M-1 reconciles net income per your accounting books with income reported on the tax return. Differences arise from items like depreciation methods, tax-exempt income, or non-deductible expenses.
Schedule M-2 tracks changes in partners’ capital accounts throughout the year, including contributions, distributions, and allocated income or loss.
Larger partnerships (over $10 million in assets) file Schedule M-3 instead of M-1, which requires more detailed reconciliation.
What Is Schedule K-1 and How Does It Relate to Form 1065?
The difference between Form 1065 and Schedule K-1 confuses many partnership business owners. Think of it this way: Form 1065 reports the partnership’s total activity, while Schedule K-1 breaks down each individual partner’s share of income, losses, deductions, and credits.
After completing Form 1065, you’ll prepare a Schedule K-1 for each partner. The partnership files copies with the IRS and distributes K-1s to partners by the filing deadline. Individual partners then use their K-1 to complete their personal income tax return—typically reporting partnership items on Schedule E (Form 1040).
Partners cannot simply wait for their K-1 to file taxes. They’re responsible for making estimated tax payments throughout the year based on their expected share of partnership income.
Filing Deadlines and Extensions for Your Business
Filing Form 1065 on time keeps your partnership compliant and avoids penalties. The standard deadline for calendar-year partnerships (January 1 through December 31) is the 15th day of the third month following year-end.
For the 2025 tax year, that means March 16, 2026 (since March 15 falls on a Sunday). Fiscal-year partnerships follow the same formula. A partnership with a June 30 year-end would file by September 15.
Extensions Through Form 7004
Need more time to gather your paperwork? Filing Form 7004 grants an automatic six-month extension. For calendar-year partnerships, this pushes the deadline to September 15, 2026.
Important: An extension only extends your time to file the return. It doesn’t extend the time partners have to pay taxes owed. Each partner must still estimate their share of partnership income and make quarterly payments to avoid penalties and interest.
Electronic Filing Requirements
The IRS now requires electronic filing for partnerships that file 10 or more returns of any type during the year. This includes Form 1065, Schedule K-1s, employment taxes, Form 1099 filings, and other information returns. Partnerships with more than 100 partners must e-file regardless of total return count.
Online tax filing services like TaxAct and various tax preparation software make e-filing straightforward for small business taxes. Many partnerships work with a CPA or tax advisor who handles electronic submission.
IRS Form 1065 Penalties: What Happens If You File Late?
Nobody wants IRS penalties eating into their business income. Here’s what happens when partnerships miss deadlines:
Penalty for Late Filing
If your partnership misses the Form 1065 deadline, the IRS assesses a monthly penalty. For 2025 returns (filed in 2026), the penalty is $260 per partner, per month, for up to 12 months.
The math adds up fast. A five-partner business filing three months late faces a $3,900 penalty ($260 × 5 partners × 3 months). Larger partnerships face proportionally steeper consequences.
Penalty for Failing to Furnish Schedule K-1s
Each partner needs their Schedule K-1 to complete their personal tax return. Failing to provide K-1s on time triggers a separate penalty of $330 per form for 2025 returns. The maximum penalty is approximately $4 million for all K-1 failures in a single year.
Intentional Disregard Penalties
If the IRS determines late filing or incorrect information was intentional, penalties increase substantially. The penalty jumps to $660 per K-1 or 10% of the total items required to be reported—whichever is greater—with no maximum cap.
Reasonable Cause for Avoiding Penalties
Circumstances beyond your control may qualify for penalty relief. Examples of reasonable cause include:
- Serious illness or death of a partner
- Natural disaster affecting business operations
- Unavoidable delays receiving necessary financial information from third parties
Document everything thoroughly and consult a tax professional about presenting your case to the IRS. Small partnerships (10 or fewer partners) may qualify for automatic penalty relief under Revenue Procedure 84-35 if all partners timely filed their individual returns and reported their share of partnership income.
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Where to File Form 1065
The IRS designates specific mailing addresses based on your partnership’s location and size. Key factors include:
Partnership location: The state where your principal place of business is located determines which IRS Service Center receives your return.
Total assets: Different addresses apply for larger partnerships versus those under specific asset thresholds.
Schedule M-3 filers: Partnerships required to file Schedule M-3 always send returns to the Ogden, Utah, IRS Service Center.
Foreign partnerships: These have a dedicated IRS address regardless of other factors.
For the most accurate filing addresses, check the current Form 1065 instructions on the IRS website. Sending your return via certified mail provides proof of timely filing if disputes arise later.
Most partnerships now e-file, which eliminates mailing address concerns entirely. Tax tips from professionals consistently recommend electronic filing for faster processing and automatic confirmation.
| Partnership Location | Total Assets | Filing Address | ||
|---|---|---|---|---|
| IL, GA, VA, NY, WI, NC, MI, SC, MD, ME, NH, IN, DE, NJ, OH, RI, DC, PA, WV, TN, MA, KY, CT, VT | Less than $10M (and no Schedule M-3) | Department of the Treasury | Internal Revenue Service Center | Kansas City, MO 64999-0011 |
| IN, OH, WI, NJ, CT, SC, DE, NC, GA, MA, MI, VT, IL, NY, VA, RI, NH, DC, MD, KY, TN, WV, PA, ME | $10M or more (or Schedule M-3) | Department of the Treasury | Internal Revenue Service Center | Ogden, UT 84201-0011 |
| OK, CO, TX, WY, AZ, IA, MT, MN, FL, KS, ND, HI, CA, OR, LA, AK, NM, UT, AR, MO, SD, MS, AL, ID, NE, WA, NV | Any amount | Department of the Treasury | Internal Revenue Service Center | Ogden, UT 84201-0011 |
| Foreign Country or US Territory | Any amount | Internal Revenue Service | P.O. Box 409101 | Ogden, UT 84409 |
Remember, filing addresses could potentially change, so verify them against the latest IRS guidelines for complete accuracy. Sending your return via certified mail provides proof of timely filing, which could be beneficial in case of any disputes.
For complex situations or foreign partnerships, discussing your specific circumstances with a tax advisor ensures clarity and peace of mind.
State-Level Partnership Income Tax Requirements
Federal Form 1065 is just one piece of the compliance puzzle. Each state has flexibility in how it taxes partnerships, and ignoring these differences leads to underpayment, penalties, or refund complications.
Where States Differ from Federal Rules
Here are primary areas where state requirements diverge:
Taxation of pass-through income: Some states follow federal rules closely. Others impose entity-level partnership taxes or calculate taxable income differently for partners. A handful of states now offer optional pass-through entity taxes that can benefit partners in high-tax states.
Filing thresholds: Certain states require partnership returns even when federal filing isn’t mandatory. These thresholds might be based on gross income, number of partners, or whether you have any in-state activity.
Due dates and extensions: Don’t assume your state matches federal deadlines. Many states set their own due dates, and extension policies vary as well.
Reporting requirements: States often impose unique schedules, partner information disclosures, or additional documentation beyond what the IRS requires.
Resources for State Compliance
Staying current on state variations requires a proactive approach:
State tax authority websites: Each state’s Department of Revenue provides comprehensive details on partnership tax laws forms, and deadlines.
Tax professionals: A tax advisor specializing in your state’s laws offers personalized guidance for navigating complex requirements. Don’t rely solely on generic tax advice.
Compliance tools: Technology solutions designed for multi-state compliance simplify tracking requirements across jurisdictions. Mosey monitors state rules and updates automatically, saving time and reducing costly errors.
Stay Compliant With Mosey
Managing Form 1065 alongside state partnership returns can overwhelm even experienced business owners. Between federal paperwork, varying state deadlines, and evolving compliance requirements, small business taxes demand significant attention.
Mosey simplifies multi-state compliance with automation features and centralized tracking. Instead of manually researching each state’s partnership filing requirements, let Mosey handle the complexity so you can focus on growing your business.
Ready to streamline your partnership compliance? Schedule a demo with Mosey today and see how we can help.
FAQ: What Is a 1065?
What is a 1065 form used for?
Form 1065 is used to report a partnership’s income, deductions, gains, losses, and credits to the IRS. It’s an information return—the partnership doesn’t pay taxes directly, but the form provides data needed to prepare Schedule K-1s for each partner.
Why would an LLC file a 1065?
An LLC files Form 1065 when it has two or more members and hasn’t elected corporate tax treatment. Multi-member LLCs are taxed as partnerships by default, meaning they must file partnership returns and issue K-1s to members.
Who is required to file a 1065?
Domestic business partnerships, multi-member LLCs taxed as partnerships, limited liability partnerships, and certain foreign partnerships with U.S. income must file Form 1065. The requirement applies if the partnership receives income or incurs expenses treated as deductions or credits.
What is the difference between a K-1 and a 1065?
Form 1065 reports the partnership’s total financial activity to the IRS. Schedule K-1 breaks down each individual partner’s allocated share of that activity. Partners use their K-1 to report partnership income on their personal income tax return.
What is the penalty for failing to file Form 1065?
For 2025 tax returns, the late filing penalty is $260 per partner, per month, for up to 12 months. Additional penalties apply for failing to furnish Schedule K-1s to partners on time ($330 per K-1 for 2025 returns).
Do I need to file a 1065 if my partnership did not have income?
Generally, no. If your partnership had no income AND no expenses that qualify as deductions or credits, you’re not required to file Form 1065. However, many tax professionals recommend filing anyway to maintain good standing with the IRS and document the partnership’s status.
