Tax Preparation for K-1 Investors

TAX PREPARATION FOR K-1 INVESTORS

Partnership, S corporation, trust, and estate K-1s — reported correctly on your personal return.

A Schedule K-1 looks like a single page, but it can carry dozens of separate items: business income, rental losses, capital gains, credits, foreign taxes, and state-specific amounts. Each one has its own place on your return and its own limits. At Victoria Bogdanovich CPA, we work with K-1 investors every season, from a single private equity fund to a portfolio of real estate syndications.

Who this is for

• Investors in real estate syndications, private equity, venture, or hedge funds
• Partners in a family partnership or a professional practice
• Shareholders in an S corporation they don’t manage
• Beneficiaries of a trust or estate who received a K-1
• Owners of publicly traded partnerships (PTPs), such as energy MLPs

What we handle

• Every line of the K-1 — ordinary income, rental income and losses, interest, dividends, capital gains, Section 1231 gains, and credits
• Passive activity rules — which losses you can use now and which carry forward
• Basis and at-risk limits — tracking whether losses are deductible at all
• Schedule K-3 — foreign income and foreign tax credit information from your investments
• State filings — nonresident returns when a partnership operates in states with an income tax
• PTP sales — ordinary income recapture when you sell units
• Late K-1s — planning your extension so you file once, correctly

Common mistakes we see

Filing before all K-1s arrive. Many K-1s arrive after April 15. Filing early and amending later costs time and money; a planned extension is usually the better path.

Ignoring state K-1 information. Investment partnerships often operate in several states. Some of those states expect a nonresident return from you.

Losing track of suspended losses. Losses you couldn’t use in earlier years become valuable when the investment is sold — but only if they were carried forward correctly every year.

Missing the foreign tax credit. Foreign taxes reported on a K-1 or K-3 are often left off the return entirely.

PTPs held in an IRA. Certain income from partnerships held in a retirement account can create a separate filing requirement for the account.

How it works

1. Check your fit — about 1 minute. Answer a few questions and see your starting fee.
2. Create your client portal account and complete our Client Application.
3. Meet with us — free Tax Discovery meeting. Upload your last two years of returns at least 24 hours before the meeting so we can discuss an estimated fee range on the call.
4. Receive your engagement package with your estimated fee and scope of work. Work begins once you sign.

Starting price

Personal return with K-1s: starting at $1,295.

A large number of K-1s, K-1s from trusts or estates, multi-state filings, and foreign information are quoted after we review your last two years of returns. Your engagement package sets out your estimated fee and what it covers. Work outside that scope is billed separately.

See your starting fee

Frequently asked questions

My K-1 hasn’t arrived yet. What should I do?
Upload everything else to your portal and let us know which K-1s are still expected. We’ll file an extension if needed, so your return is filed once and correctly.

Why do I owe tax when I didn’t receive any cash?
Partnerships and S corporations pass income through to their owners whether or not it is distributed. You can owe tax on income the investment kept.

Do I need to file in other states?
Possibly. Texas has no state income tax, but your K-1 may show income from states that do. Some partnerships file composite returns on your behalf; others don’t. We review the state information on each K-1.

Can my K-1 losses offset my salary?
Usually not. Most investment K-1 losses are passive and can only offset passive income. Unused losses carry forward until you have passive income or sell the investment.

What’s the difference between a K-1 and a K-3?
The K-3 reports international information, such as foreign income and foreign taxes paid. Not every investor needs it, but when it applies it affects your foreign tax credit.

I received a K-1 from a trust or estate. Is that the same?
It is similar, but trust and estate K-1s follow their own rules. If you’re also the trustee or executor, we can prepare the trust or estate return (Form 1041) as well.

Ready to see where you fit? Take the 1-minute fit check or see our pricing and how it works.