How Do I File Form 1065 and Get K-1s for a Multi-Member LLC?

Someone on Reddit and their spouse own a multi-member LLC (a cottage bakery) and file taxes jointly. They wanted to know how to file Form 1065, how that generates K-1 forms for each member, whether they can still file jointly, and whether the business would affect his W-2 even if the LLC did not make money. You file Form 1065 for the partnership; the form and associated schedules produce Schedule K-1 (Form 1065) for each partner. You report each person's K-1 on your personal tax return; you can still file a joint return, and your husband's W-2 income is not changed by the LLC. If the LLC has a loss, the losses on the K-1 can offset other income on your joint return.

Bottom line: For a multi-member LLC taxed as a partnership, the LLC files Form 1065 and issues a Schedule K-1 (Form 1065) to each member with that member's share of income, deductions, and credits. You report each K-1 on your personal return. You can still file jointly; reporting LLC income or loss on K-1s does not prevent joint filing. Your husband's W-2 income is not affected by the LLC, even if the business had no profit or you did not take draws. K-1 losses can offset other income on your joint return. For state filings or complex situations, consult a tax professional.

Question from Reddit

How do I file 1065 and get k-1 forms?

Why are taxes so confusing to me! My husband and I own a cottage bakery that we started this past year. It is a multi person LLC between us. We also file our taxes jointly every year.

From what I have read I need to file a 1065, then report the K-1 for each of us on our joint tax return.

How do I file a 1065 and how does this generate a K-1? Can we still file jointly?

He has a full time job as well, will this affect his W-2 if we didn't even make money on our business? We didn't take any money out to 'pay' ourselves. I'd like to do this myself online but it's seeming like I'll have to hire a professional. Sigh

Source: Reddit

Analysis

The question involves filing Form 1065 and generating K-1 forms for an LLC, and whether these filings affect the ability to file jointly. This involves understanding the nature of LLCs and their tax treatment, specifically regarding income distribution and reporting on individual tax returns.

Answer

To file Form 1065 for your multi-member LLC, follow these steps:

How to file Form 1065 and how K-1s are generated

Gather financial records. Collect documents regarding your income and expenses for the business.
Complete Form 1065. Fill out the form to report the business income, deductions, and other pertinent information. This can usually be done using tax software or through a tax professional.
Generate K-1 forms. After filing, each member of the LLC will receive a Schedule K-1 (Form 1065), which reports their share of the partnership's income, deductions, and credits. You then report the amounts from each K-1 on the corresponding person's personal tax return (or on your joint return, one K-1 per spouse).

Can we still file jointly? What about his W-2?

You can still file a joint tax return while reporting income from the LLC on K-1 forms. Each spouse's K-1 is reported on the same joint Form 1040. Your husband's W-2 income will not be affected by the LLC, even if the LLC did not earn a profit and you did not take money out. Any losses reported on the K-1 can offset other income (including W-2 income) on your joint return.

For step-by-step guidance on Form 1065 and K-1 reporting without hiring a professional, you can create an account with Margen to walk through the process and see how your LLC income or loss flows onto your joint return.

Applicable Sections

Federal / IRS

Form 1065: This form is used by partnerships to report income, deductions, gains, and losses from the operation of a partnership (IRS.gov).
Schedule K-1 (Form 1065): This form is issued to partners indicating their share of the partnership's income, deductions, and credits, which must be reported on their personal tax returns.

Practical Notes

Consider using tax software that guides users through the Form 1065 and K-1 generation process, which can help avoid hiring a professional if your situation is straightforward.
Keep thorough records of all business transactions, as these will be essential for accurately completing your tax forms.
Margen can help you model your LLC income or loss and how it appears on your joint return; creating an account may make doing it yourself more manageable.

Limitations

This answer does not cover any state-level filing requirements specific to your LLC or the potential complexities of tax implications related to specific types of business income or deductions. For intricate situations or additional guidance, consulting a tax professional might still be advisable. Margen can help you run scenarios and clarify how your 1065 and K-1s flow into your joint filing before you file.

Are you experiencing a similar problem?

Try Margen to work through resolutions and file your taxes correctly.

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How Do I File Form 1065 and Get K-1s for a Multi-Member LLC? (Reddit Q&A)