Key Takeaways:
- Form 1065 is due March 17, 2026 for calendar-year partnerships (March 15 falls on Sunday)
- Partnerships with 10+ returns must file electronically
- Late filing penalty: $260 per partner, per month (maximum 12 months)
- Schedule K-1 must be provided to each partner by the Form 1065 due date
- NEW 2026: Must report SSTB gross receipts per OBBBA requirements
- Form 1065 is an information return. Partnerships don’t pay entity-level tax.
Every domestic partnership files Form 1065 with the IRS each year. Miss the deadline? That’s $260 per partner, per month. A five-partner firm filing three months late? $3,900. Gone.
But here’s what most partnership owners don’t realize: Form 1065 isn’t a tax payment. It’s an information return. The partnership itself doesn’t owe tax. Instead, income, deductions, gains, and losses flow through to each partner via Schedule K-1. Partners then report those amounts on their personal returns.
This guide walks through every section of Form 1065 with 2026 deadlines, penalty amounts, and the new OBBBA reporting requirements that took effect this year.
Table of Contents
What Is Form 1065?
Form 1065 is officially titled U.S. Return of Partnership Income. Every domestic partnership must file it annually to report business operations to the IRS.
The form captures:
- Gross income and deductions
- Each partner’s share of profits, losses, and credits
- Balance sheet information
- Capital account changes
Unlike a corporate return where the entity pays tax, Form 1065 is purely informational. The partnership calculates its income and allocates it to partners. Those partners then pay tax on their individual returns based on their Schedule K-1.
Here’s what matters: The IRS requires Form 1065 even if your partnership had zero income or operated at a loss. No activity doesn’t mean no filing requirement.
Who Must File Form 1065?
Domestic Partnerships That Must File
If your business structure falls into any of these categories, you file Form 1065:
- General partnerships where two or more people conduct business together
- Limited partnerships (LPs) with general and limited partners
- Limited liability partnerships (LLPs) common among professional firms
- Multi-member LLCs that haven’t elected S-Corp or C-Corp status
- Joint ventures treated as partnerships for tax purposes
The default classification for a multi-member LLC is partnership taxation. Unless you’ve filed Form 8832 or Form 2553 to change that, you’re filing Form 1065.
Foreign Partnerships With U.S. Connections
Foreign partnerships file Form 1065 when they have:
- Income from U.S. sources
- A U.S. trade or business
- U.S. partners entitled to receive Schedule K-1
If your partnership has international components, you may also need to consider Form 8865 requirements for foreign partnership reporting.
Who Does NOT File Form 1065
Single-member LLCs are disregarded entities. The owner reports business income on Schedule C of Form 1040. No Form 1065 required.
Qualified joint ventures between spouses can each file Schedule C instead of a partnership return. This election must be made properly.
Syndicates with purely passive investment income may qualify for exemption under certain conditions.
Electing partnerships under Section 761(a) that operate for investment purposes only, not active trade or business, may exclude themselves from subchapter K.
2026 Filing Deadlines and Extensions
When Is Form 1065 Due?
For calendar-year partnerships (January 1 through December 31), Form 1065 is due on the 15th day of the third month after the tax year ends.
For tax year 2025, that’s March 15, 2026. But March 15 falls on a Sunday. The deadline moves to the next business day: March 16, 2026.
Update: With March 16 being observed differently in some jurisdictions, confirm with the IRS. The practical deadline for most partnerships is March 17, 2026.
Fiscal year partnerships follow the same rule. A partnership with a June 30 year-end would file by September 15.
| Partnership Type | Tax Year | Due Date | Extended Due Date |
|---|---|---|---|
| Calendar Year | 2025 | March 16-17, 2026 | September 15, 2026 |
| Fiscal Year (June 30) | 2025 | October 15, 2025 | April 15, 2026 |
How to Request an Extension
File Form 7004 by the original due date to get an automatic six-month extension. This pushes a calendar-year partnership deadline to September 15, 2026.
Critical point: An extension to file is NOT an extension to pay. Partners must still estimate their share of partnership income and make quarterly estimated tax payments. Missing those payments triggers penalties and interest on the partner’s individual return.
The extension gives you more time to complete Form 1065. It doesn’t delay the partners’ tax obligations.
For detailed guidance on filing tax extensions and what they actually cover, we’ve written a separate guide.
Step-by-Step Form 1065 Instructions
Form 1065 has multiple pages and schedules. Here’s what goes where.
Page 1: Income Section (Lines 1-8)
This section captures the partnership’s gross income from operations.
Line 1a-c: Gross Receipts or Sales Report total receipts from the partnership’s trade or business. Subtract returns and allowances. If you sell inventory, calculate cost of goods sold on Schedule A.
Line 2: Cost of Goods Sold Pull this from Schedule A if your partnership sells products. Service businesses typically leave this blank.
Line 3: Gross Profit Simple math: Line 1c minus Line 2.
Line 4: Ordinary Income from Other Partnerships If your partnership owns interests in other partnerships, report that ordinary income here. This doesn’t include separately stated items that flow through on those K-1s.
Line 5: Net Farm Profit (Loss) Report farming income from Form 4835 or Schedule F if applicable.
Line 6: Net Gain (Loss) from Form 4797 Sale of business property, depreciation recapture, and Section 1231 gains go here.
Line 7: Other Income (Loss) Catch-all for income not reported elsewhere. Attach a statement explaining each item.
Line 8: Total Income (Loss) Add lines 3 through 7.
Page 1: Deductions Section (Lines 9-22)
The deductions section lists expenses that reduce partnership ordinary income.
Line 9: Salaries and Wages Report wages paid to employees. Not partners. Partner compensation is handled differently through guaranteed payments or profit allocations.
Line 10: Guaranteed Payments to Partners Payments made to partners for services or capital use, regardless of partnership income. These are deductible by the partnership and reported separately on each partner’s K-1. Learn more about how guaranteed payments work and their tax treatment.
Line 11: Repairs and Maintenance Ordinary repairs that don’t add value or extend asset life. Major improvements get capitalized and depreciated.
Line 12: Bad Debts Only for accrual-basis partnerships. Cash-basis partnerships can’t deduct bad debts because they never reported the income.
Line 13: Rent Business rent for office space, equipment, or other property.
Line 14: Taxes and Licenses Business taxes, licenses, and fees. Not partner-level income taxes.
Line 15: Interest Business interest expense, subject to Section 163(j) limitations for larger partnerships.
Line 16a-c: Depreciation Report depreciation from Form 4562. Line 16a shows total depreciation. Line 16b shows any amounts included in cost of goods sold. Line 16c is the deductible portion.
Line 17: Depletion For partnerships with natural resource extraction operations.
Line 18: Retirement Plans Employer contributions to qualified retirement plans for employees. Partner retirement contributions flow differently.
Line 19: Employee Benefit Programs Health insurance, life insurance, and other benefits for employees. Partner benefits have separate rules.
Line 20: Other Deductions Everything else. Attach a statement itemizing each deduction. Common items include professional fees, office expenses, travel, and insurance.
Line 21: Total Deductions Add lines 9 through 20.
Line 22: Ordinary Business Income (Loss) Subtract Line 21 from Line 8. This is the partnership’s ordinary income before separately stated items.
Schedule B: Other Information
Schedule B asks 30+ yes/no questions about partnership structure and operations. Answer carefully. Inconsistencies trigger IRS attention.
Key questions include:
- Partnership type and accounting method
- Principal business activity codes
- Foreign ownership percentages
- Whether the partnership made a Section 754 election
- Substantial built-in loss disclosures
NEW for 2026: Question about SSTB gross receipts. Under the One Big Beautiful Bill Act, partnerships must now report whether they had gross receipts from a Specified Service Trade or Business during the tax year. This information also goes on each partner’s Schedule K-1.
Schedule K: Partners’ Distributive Share Items
Schedule K summarizes all items that flow through to partners. It’s the master document that feeds Schedule K-1s.
Lines 1-11: Income Items
- Line 1: Ordinary business income (from page 1)
- Lines 2-3: Rental income
- Lines 4a-c: Guaranteed payments
- Lines 5-6: Interest and dividends
- Lines 7-9: Capital gains and losses
- Line 10: Section 1231 gains
- Line 11: Other income
Lines 12-13: Deductions
- Line 12: Section 179 deduction
- Line 13: Other deductions (various codes)
Lines 14-17: Credits and Other Items
- Lines 14a-c: Self-employment earnings
- Line 15: Credits
- Line 16: Foreign transactions
- Line 17: Alternative minimum tax items
Lines 18-20: Additional Information
- Line 18: Tax-exempt income
- Line 19: Distributions
- Line 20: Other information including QBI data
Every dollar on Schedule K must trace to the sum of all Schedule K-1s issued to partners.
Schedule L: Balance Sheet Per Books
Schedule L reports the partnership’s assets, liabilities, and partners’ capital at the beginning and end of the tax year.
Who must file Schedule L? Partnerships with both total receipts AND total assets exceeding $250,000.
Smaller partnerships can skip Schedule L, M-1, and M-2 by checking Box 4 on Schedule B.
Schedule M-1: Reconciliation of Income
Schedule M-1 explains why book income differs from taxable income. Common reconciling items:
- Meals and entertainment (limited deductibility)
- Depreciation differences (book vs. tax methods)
- Tax-exempt income
- Non-deductible expenses
Partnerships filing Schedule M-3 skip Schedule M-1.
Schedule M-2: Analysis of Partners’ Capital Accounts
Schedule M-2 tracks changes in partners’ capital throughout the year:
- Beginning capital
- Capital contributions
- Net income (loss) per books
- Withdrawals and distributions
- Other adjustments
- Ending capital
Important: Schedule K-1 Box L must report capital accounts using the tax basis method. This became mandatory and helps IRS matching.
Required Schedules and Attachments
Beyond the core form, partnerships must include various schedules depending on their activities.
| Schedule | Purpose | When Required |
|---|---|---|
| Schedule K-1 | Partner’s share of items | Always (one per partner) |
| Schedule A | Cost of goods sold | If selling inventory |
| Schedule B | Other information | Always |
| Schedule D | Capital gains/losses | If applicable |
| Schedule K | Summary of distributive items | Always |
| Schedule K-2 | International items summary | If international activity |
| Schedule K-3 | Partner’s international items | If international activity |
| Schedule L | Balance sheet | Receipts + assets > $250K |
| Schedule M-1 | Income reconciliation | If not filing M-3 |
| Schedule M-2 | Capital account analysis | Always |
| Schedule M-3 | Large partnership reconciliation | Assets > $10M |
Schedules K-2 and K-3 created significant compliance burden when introduced. The IRS has added filing exceptions for certain domestic partnerships. Check current guidance to see if you qualify.
For a detailed walkthrough of Schedule K-1 reporting, see our complete Schedule K-1 guide.
Electronic Filing Requirements
The IRS requires electronic filing for partnerships that file 10 or more returns of any type during the calendar year. This includes Forms W-2, 1099, and other information returns in the count.
Most partnerships with employees or contractors easily hit this threshold.
Benefits of e-filing:
- Faster processing and acknowledgment
- Confirmation of receipt
- Reduced error rates
- Required for Schedules K-2 and K-3
Partnerships below the threshold can still e-file or submit paper returns. Given processing speeds, e-filing makes sense for almost everyone.
Common Form 1065 Mistakes to Avoid
After analyzing hundreds of partnership returns, certain errors appear repeatedly:
1. Missing the deadline entirely File by March 17, 2026, or request an extension. Late filing penalties start immediately.
2. Incorrect partner information Wrong Social Security numbers or addresses delay K-1 delivery and cause IRS matching issues. Verify partner details annually.
3. Misclassifying guaranteed payments Guaranteed payments go on Line 10, not mixed with salaries on Line 9. The tax treatment differs significantly.
4. Schedule K and K-1 inconsistencies Total K-1 amounts must equal Schedule K. Any mismatch triggers IRS scrutiny.
5. Wrong accounting method You can’t switch between cash and accrual without IRS approval. Match what you’ve filed previously.
6. Missing Schedule K-2/K-3 requirements If your partnership has any international items, foreign partners, or certain foreign-source income, these schedules may be required even if amounts are small.
7. Incorrect basis reporting Schedule K-1 Box L capital accounts must use the tax basis method. Many partnerships still report book basis incorrectly.
8. Forgetting the new SSTB disclosure Starting 2026, partnerships must report whether they had SSTB gross receipts. This flows to Schedule B and each K-1.
Form 1065 Late Filing Penalties
The IRS doesn’t give grace periods. Penalties start the day after the deadline.
2026 Penalty Amounts
Late filing: $260 per partner, per month (or partial month), for up to 12 months
Failure to provide K-1: $330 per form. Intentional disregard pushes this to $660.
Penalty Calculation Example
A five-partner partnership files Form 1065 three months late:
$260 × 5 partners × 3 months = $3,900 penalty
The same partnership missing K-1 delivery to those five partners adds another $1,650 ($330 × 5).
Total exposure: $5,550 for a three-month delay.
Requesting Penalty Abatement
First-time penalty abatement may apply if the partnership has a clean compliance history. You must request it actively.
Reasonable cause relief requires documentation showing circumstances beyond your control prevented timely filing. Common reasons include natural disasters, serious illness, or reliance on a tax professional who failed to file.
For help addressing IRS penalties and potential relief options, professional guidance often pays for itself.
Where to File Form 1065
Electronic filing goes through IRS-approved e-file providers. Most tax software handles transmission automatically.
Paper filing (if allowed for your situation) goes to:
Most states including Texas: Department of the Treasury Internal Revenue Service Center Ogden, UT 84201-0011
Partnerships filing Schedule M-3 must file at the Ogden address regardless of location.
Check IRS.gov for current filing addresses as these occasionally change.
2026 Updates: What Changed Under OBBBA
The One Big Beautiful Bill Act, signed July 4, 2025, brought several changes affecting partnership taxation:
QBI Deduction Made Permanent
The Section 199A qualified business income deduction no longer expires. Partners can continue claiming up to 20% of QBI on their individual returns.
2026 threshold changes:
- Single/HoH: Phase-out begins at $200,000 (was $197,300)
- Married filing jointly: Phase-out begins at $400,000 (was $394,600)
Learn how the QBI deduction works for partnerships and whether your business qualifies.
New SSTB Reporting Requirement
Partnerships must now disclose on Form 1065 and Schedule K-1 whether the entity had gross receipts from a Specified Service Trade or Business. This includes:
- Health care
- Law
- Accounting
- Consulting
- Financial services
- Performing arts
- Athletics
This information helps the IRS verify QBI deduction eligibility for partners above income thresholds.
SALT and PTET Changes
The OBBBA changed how state pass-through entity taxes work. Entity-level state taxes that previously provided a SALT cap workaround now face new limitations. Partnerships should revisit their multi-state filing strategies with these changes in mind.
Frequently Asked Questions
What is Form 1065 used for?
Form 1065 is the annual information return filed by partnerships to report income, deductions, gains, losses, and credits. The partnership itself doesn’t pay tax. Instead, these items pass through to partners via Schedule K-1, and partners pay tax on their individual returns.
When is Form 1065 due for tax year 2025?
Calendar-year partnerships must file by March 16 or 17, 2026 (March 15 falls on Sunday). An automatic six-month extension is available by filing Form 7004 by the original due date.
What is the penalty for filing Form 1065 late?
The late filing penalty is $260 per partner, per month (or partial month), for up to 12 months. A five-partner partnership filing three months late owes $3,900.
Do I have to file Form 1065 if my partnership had no income?
Yes. The IRS requires Form 1065 even if the partnership had zero income or operated at a loss during the tax year. No activity doesn’t mean no filing requirement.
What’s the difference between Form 1065 and Schedule K-1?
Form 1065 is the partnership’s information return filed with the IRS. Schedule K-1 is provided to each partner showing their individual share of partnership items. Partners report K-1 information on their personal tax returns.
Can partnerships file Form 1065 electronically?
Yes. Partnerships filing 10 or more returns of any type during the year must file electronically. Others may choose e-filing or paper submission.
What schedules are required with Form 1065?
All partnerships must include Schedule B, Schedule K, Schedule M-2, and a Schedule K-1 for each partner. Schedule L and M-1 are required if total receipts and total assets both exceed $250,000.
Do single-member LLCs file Form 1065?
No. Single-member LLCs are disregarded entities and report income on Schedule C of Form 1040. Form 1065 is only for partnerships with two or more members.
What is the new SSTB reporting requirement for 2026?
Under the OBBBA, partnerships must report on Form 1065 and Schedule K-1 whether the entity had gross receipts from a specified service trade or business during the tax year. This helps the IRS verify QBI deduction eligibility.
Where do I mail Form 1065?
Most partnerships mail to: Department of the Treasury, Internal Revenue Service Center, Ogden, UT 84201-0011. Electronic filing is preferred and required for larger filers.
Getting Form 1065 Right
Partnership returns have more moving parts than most business owners expect. The interplay between Form 1065, Schedule K, Schedule K-1, and each partner’s individual return creates multiple points where errors compound.
The 2026 changes add another layer. New SSTB reporting, updated QBI thresholds, and revised PTET treatment all require attention.
If your partnership return feels like guesswork, or if you’ve received penalty notices for late or incorrect filings, that’s a sign the complexity has outgrown your current approach.
SDO CPA specializes in partnership tax services for business owners with exactly this situation. We handle partnerships and S-Corps representing 80% of our practice. Your situation isn’t unique to us. Contact us to discuss your partnership return.