Schedule K-1 is a form used to report the taxpayer's portion of the income from a partnership, S-corporation, estate or trust. These legal entities use a pass-through taxation, according to TurboTax. They shift the responsibility for income tax from the partnership or S-corporation to the owners and from the estate or trust to the beneficiaries.
According to the IRS, a K-1 is created as part of the tax return of the entity: Form 1120S for S-corporations, 1065 for partnerships, and 1041 for estates and trusts. It shows taxable income, whether or not the taxpayer received any. It also shows expenses, credits and distributions that benefit the taxpayer. The form is complex enough that each version has detailed instructions available on the IRS website, and they appear a bit different depending on the issuing entity.
According to Charles Schwab, taxpayers receive K-1s for investments in partnerships through a brokerage. Some entities that generate K-1s send out their forms after the April 15th filing deadline. The recipient either has to wait to file his own return, or file and amend once the K-1 is in hand. A copy does not have to be sent in with the tax return, according to the IRS, but the amounts reported should match the K-1.