How do I Prepare Schedule K-1 for a Partnership or S Corporation?

Question: How do I Prepare Schedule K-1 for a Partnership or S Corporation?

Schedule K-1 is used to report individual partner or shareholder share of income for a partnership or an s corporation. Items from the K-1 are transferred to the individual partner or shareholder personal tax return. Note that the K-1 is slightly different for a partner vs. a shareholder. Also note that the K-1 cannot be completed until the tax return for the partnership (on Form 1065) or s corporation (on Form 1120S) has been prepared.
Download Schedule K-1 for Form 1065 (Partnership) or Schedule K-1 for Form 1120-S (S corporation) to see the difference.

Answer:

Completing a K-1 for a Partner (or Member of an LLC)
The K-1 information is based on the partner's share of the relevant information from the partnership tax return (Form 1065).

1. Information about the partnership
   
2. Information about the partner, including name and address
   
3. Type of partner (general/LLC member), Limited partner, etc.)
   
4. Partner's share of profit/loss/capital at the beginning and end of the tax year
   
5. Partner's share of liabilities at the beginning and end of the tax year
   
6. Partner's capital account analysis: beginning balance, changes, and ending balance
   
7. Partner's share of income: ordinary income, rental/real estate,interest, dividends, royalties, short-term and long-term capital gains, other income/loss, section 179 deductions, other deductions, and self-employment earnings/loss
   
8. Credits
   
9. Foreign transactions
   
10. Alternative minimum tax items
    
11. Tax-exempt income and nondeductible expenses
    
12. Distributions
    
13. Other information.

Completing a K-1 for a Shareholder of an S Corporation
The K-1 information is based on the shareholder's share of the relevant income/loss items from the s corporation tax return (Form 1120S).

1. Information about the corporation
   
2. Information about the shareholder, including name and address
   
3. Shareholder's percentage of stock ownership for tax year
   
4. Shareholder's share of income: ordinary, rental/real estate,interest, dividends, royalties, short-term capital gains, long-term capital gains, collectibles, unrecaptured section 1250 gain, net section 1231 gain/loss, other income/loss, section 179 deductions, other deductions, and self-employment earnings/loss
   
5. Credits
   
6. Foreign transactions
   
7. Alternative minimum tax items
   
8. Tax-exempt income and nondeductible expenses
   
9. Items affecting shareholder basis
   
10. Other information.