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If your business operates as a partnership, Form 1065 is one of the most important tax forms you’ll need to file.
Form 1065 is how partnerships report their annual financial activity to the IRS—but since partnerships are "pass-through" entities, they don’t pay taxes. Instead, the profits and losses flow through to the individual partners, who report them on their tax returns.
In this guide, we’ll walk you through each section of Form 1065, with a step-by-step breakdown to make it easier for you to complete and file the tax return for your partnership yourself.
IRS Form 1065, officially called the U.S. Return of Partnership Income, is used to report a partnership’s income, deductions, gains, and losses for the year.
Unlike corporations, partnerships don’t pay corporate income taxes. Instead, their income "flows through" to the partners, who pay taxes individually. The IRS uses Form 1065 to track a partnership’s financial activity and ensure each partner correctly reports their share of profits or losses on their personal tax return.
This form also helps the IRS ensure that all income is properly accounted for and that partnerships comply with tax laws.
The image above shows the first page of Form 1065. The form consists of five pages, with additional schedules depending on your business structure.
While all five pages must be filed, some schedules may not apply to your partnership. It’s okay to leave those sections blank when submitting the form.
If your business is structured as a partnership, you’re required to file Form 1065. This includes:
Not sure if your LLC should file as a partnership or corporation?
Book a free consultation with Lazo, and we’ll help you determine the best structure for your startup.
Before filling out Form 1065, gather the following:
With all this information ready, let’s move to the actual filing process.
The first section of Form 1065 requires basic business details, including:
Most small businesses won’t need to fill in Line K unless they have multiple business activities across different industries.
Here, you’ll list business expenses that reduce taxable income. Some common deductions include:
Most partnerships aren’t directly taxed, but partners pay income tax on their share of profits. In rare cases where a partnership owes taxes, consult a CPA for guidance.
This two-page section contains 30 questions about your partnership. Most require "Yes" or "No" answers, but some may need extra details.
🚨 Important: This section designates a "partnership representative"—a person authorized to act on behalf of the partnership. They must:
This section (on page 4) summarizes each partner’s share of income, deductions, and credits.
Your business balance sheet goes here. If you answered “Yes” to question 4 on Schedule B, you can skip this section.
If your tax return shows a different net income than your financial statements, this is where you explain the difference. This section is only required if you answered "No" to question 4 on Schedule B.
This section tracks changes in partner capital accounts and is only required if you answered “No” to question 4 on Schedule B.
Filing Form 1065 isn’t rocket science, but making sure everything is accurate can be overwhelming—especially when it comes to tracking income, deductions, and partner allocations.
If you want to avoid tax headaches and ensure compliance, let Lazo’s Tax team handle the hard work for you. We make tax filing seamless and cost-effective compared to traditional CPA firms.
📅 Book a free consultation today and get your partnership taxes sorted before the deadline!
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