How is income from partnerships reported?

Income from partnerships is reported primarily through Schedule K-1. Each partnership submits an informational return on Form 1065, but this form does not convey the income directly to individual partners. Instead, the partnership provides each partner with a Schedule K-1, which details the partner's share of the income, deductions, and credits from the partnership.

Partners use the information from the K-1 to report their respective share of income on their personal income tax returns. This process ensures that the income is correctly attributed to the individual partners without the partnership itself being taxed as a separate entity. The use of Schedule K-1 is essential for transparency and accurate reporting of partnership income on individual tax filings.