If you're working out how to file taxes for an LLC partnership, the answer is two returns: the LLC files Form 1065 by March 15 and gives each member a Schedule K-1, and each member reports that share on a personal return. The IRS treats a multi-member LLC as a partnership, so the LLC itself generally pays no federal income tax; the members pay tax on what their K-1s say.

What form does a multi-member LLC file?

A multi-member LLC is taxed as a partnership by default under the check-the-box regulations at Treas. Reg. § 301.7701-3. The default filing is Form 1065, U.S. Return of Partnership Income. The requirement to file comes from IRC § 6031. Along with the 1065, the partnership must furnish a Schedule K-1 to each member and attach copies to the return.

You can elect to have your LLC taxed as an S corporation or C corporation instead, but that requires filing Form 8832 or Form 2553. Unless you made that election, you are in the default partnership track and Form 1065 is what the IRS expects. Whether an election makes sense is covered in our small business tax planning guide. For what else changes when an LLC has two or more members, see our overview of multi-member LLC taxes.

When is the partnership tax deadline for 2026?

For a calendar-year partnership, the 2026 Form 1065 is due March 15, 2027. That is a month earlier than the personal filing deadline. The partnership return must be filed and K-1s must be furnished to members before members can file their individual returns.

You can get an automatic six-month extension to September 15, 2027 by filing Form 7004 by the original March 15 deadline. The extension under Treas. Reg. § 1.6081-2 also extends the time to furnish K-1s to members. It does not extend the time to pay any tax the members owe — estimated payments still need to happen on the personal side.

How do you file Form 1065, step by step?

A partnership return runs in five steps, in this order:

1. Close the books for the year: income, expenses, and each member's capital account.
2. Prepare Form 1065 and a Schedule K-1 for every member, and attach copies of the K-1s to the return.
3. File by March 15, 2027, for a 2026 calendar-year LLC, or file Form 7004 by that date to extend to September 15, 2027.
4. Give each member their K-1.
5. Each member reports their share on their personal Form 1040, through Schedule E.

Members can't finish their own returns until the partnership return, and the K-1s it produces, are done. If the LLC is new this year, the setup decisions that come before step one are in how to file taxes for an LLC in the first year.

What records do you need to file Form 1065?

You need a complete set of books: income, cost of goods sold, expenses, a balance sheet (if required), and tax-basis capital account rollforwards for each member. Every messy 1065 I have cleaned up started the same way: nobody kept the books with the return in mind. If your books are behind, start with our breakdown of when to hire an accountant vs. a bookkeeper to get from disorganized records to a fileable return.

The specific items the return needs:

• Profit and loss statement for the tax year
• Balance sheet (beginning and ending), unless the small-partnership exception below applies
• Capital account reconciliation showing contributions, distributions, share of income/loss, and ending balances on a tax-basis
• Each member's ownership percentage and profit-sharing ratio per the operating agreement
• W-2 wage information and UBIA of qualified property for QBI reporting
• Details of any property distributed to members during the year
• Debt allocation information (recourse vs. nonrecourse) for basis calculations

Smaller partnerships can skip Schedules L, M-1, and M-2 when the answer to Schedule B, question 4 is “Yes”; the Form 1065 instructions make them optional in that case.

What goes on Schedule K-1 and why does it matter?

Schedule K-1 breaks down each member's share of the partnership's income, deductions, credits, and other items. The reason it exists is that partnerships are pass-through entities — the tax liability flows to the members, not the entity. Each member uses the K-1 to complete Schedule E of their personal Form 1040.

The K-1 reports ordinary business income or loss separately from items that have special tax treatment. For example, capital gains, Section 179 expense deductions, charitable contributions, and Qualified Business Income (QBI) information each appear on separate lines. This matters because those items are taxed or limited under different rules on the member's personal return.

The IRS now requires tax-basis capital account reporting on Schedule K-1, Box L. Using GAAP or "other" methods is no longer permitted.

How does partner basis limit your losses?

Under IRC § 704(d), a member can only deduct partnership losses up to the amount of their adjusted basis in the partnership interest. Basis starts with the money and property a member contributes, increases with additional contributions and share of income, and decreases with distributions and share of losses.

If your K-1 shows a $50,000 loss but your basis is only $10,000, you can deduct $10,000 this year. The remaining $40,000 is suspended and carried forward until you restore basis — either by contributing more capital or by earning enough partnership income to absorb it. The K-1 won't apply that limit for you. The partner's instructions for Schedule K-1 put it on the member: "It's the partner's responsibility to consider and apply any applicable limitations."

Do you need to report QBI information on the K-1?

Yes. The partnership must provide the supplemental information each member needs to calculate their Qualified Business Income deduction under IRC § 199A. This includes the member's share of W-2 wages paid by the partnership and the unadjusted basis immediately after acquisition (UBIA) of qualified property. Without this data, the member cannot compute the deduction correctly.

For 2026, the QBI threshold is $403,500 for married filing jointly and $201,750 for single filers. Below those thresholds, the wage and property limitations do not apply. Above them, the deduction is limited to the greater of 50% of W-2 wages or 25% of W-2 wages plus 2.5% of UBIA. The deduction itself is 20% of qualified business income, with a minimum deduction of $400 when at least $1,000 of QBI is present (made permanent by the 2025 tax law known as the One Big Beautiful Bill Act).

Leaving the QBI wage and property data off the K-1 is an easy miss on a self-prepared 1065, and the member is the one who pays for it: a member above the threshold has no way to work the wage and property limits without those numbers.

What happens if you file Form 1065 late?

The penalty is $260 per partner, per month (or fraction of a month), up to 12 months, under IRC § 6698 — and it applies even if the partnership owes no tax at all. One owner on the TurboTax community boards wrote:

"Got a penalty from the IRS for late filing of business taxes of $1,950 for a 2-man LLC. We dissolved the company back in July Were we supposed to file immediately?"

His two-member LLC shut down in July; in a follow-up he said it made about $2,000 that year. He filed the final return the following March — the month he assumed it was due. Dissolving the LLC ended its tax year in July, and a partnership return is due the 15th day of the third month after the tax year ends (Form 1065 instructions). His deadline was that fall. By March he was five months late, and the meter had run at the per-partner rate the whole time: 5 months × 2 partners × $195 equals the $1,950 bill that showed up. The penalty was almost exactly what the business earned all year.

That $195 was the rate back then. For returns due in 2027 — which is when your 2026-tax-year Form 1065 lands — it's $260 per partner, per month per Rev. Proc. 2025-32. The same mistake today costs $2,600. Your filing clock starts when the partnership's tax year ends. For a calendar-year LLC that's still running, that means March 15; for a dissolved LLC, the clock starts at the dissolution date.

There is a separate penalty for failing to file correct K-1s under IRC § 6721 — for K-1s due in 2027, $340 per return, with a calendar-year cap of $1,397,000 for businesses with gross receipts of $5 million or less ($4,191,500 above that). These stack on top of the § 6698 penalty.

When a § 6698 notice lands, I check two relief doors before anyone pays it. First-time abatement: the IRS's administrative penalty relief program explicitly covers the § 6698 penalty when your filing history for the prior three years is clean. Second, for partnerships of 10 or fewer qualifying partners where every partner fully reported their share on a timely personal return, Rev. Proc. 84-35 treats the partnership as having reasonable cause. You will read on older blogs that the 2018 audit-rule changes killed that relief — the IRS's own Chief Counsel confirmed in writing that it "is not obsolete and continues to apply." Neither door eliminates the filing requirement itself: file the late return first, then ask for the abatement.

Does a partnership with no income have to file Form 1065?

Not if it had nothing at all. A partnership that had no income, deductions, or credits for the year is not required to file Form 1065 under Treas. Reg. § 1.6031(a)-1. That covers the LLC that was formed and left untouched, not the one that lost money. A single expense the LLC would deduct, like a registered-agent fee paid from the business account, makes it a filing year, and a late return then runs the same $260-per-partner meter. We walk through that test in filing LLC taxes with no income.

Should you hire someone to file your partnership return?

For most multi-member LLCs, yes. The penalty math makes a late or wrong return expensive, and the K-1 reporting requirements (tax-basis capital accounts, QBI supplemental data, debt allocation) are technical enough that most multi-member LLCs use a preparer. Whoever prepares it will need the records list above from you.

What if members disagree on how to report an item?

Partners must report items consistently with the partnership return unless they file Form 8082, Notice of Inconsistent Treatment. If a member disagrees with how the partnership reported something on the K-1 — say, the partnership treated a payment as a deductible expense but the member believes it should be a capital expenditure — the member files Form 8082 with their personal return to disclose the inconsistency. Without this form, the IRS treats the member's reporting as a math error and can adjust it summarily.

Can you change the profit split mid-year?

Yes, but with limits. Under IRC § 761(c), the partnership agreement determines how income and loss are allocated. You can modify the profit-sharing ratio during the year, but the modification must be made by the original filing deadline (March 15, 2027, for a 2026 calendar-year partnership).

An oral agreement between two members in June may not match the written operating agreement. If the operating agreement says 50/50 but the members agreed verbally to 60/40, the K-1 allocations need to reflect the actual agreement, and the operating agreement should be formally amended. Discrepancies between the operating agreement and the tax return create legal and reporting problems that compound over time.

Who pays if the IRS audits your partnership return?

By default, the partnership does. Under the Bipartisan Budget Act of 2015 (IRC §§ 6221–6241), most partnerships fall under the Centralized Partnership Audit Regime: if the IRS examines the partnership return and proposes adjustments, any resulting tax is collected at the partnership level by default. This means the partnership itself owes the imputed underpayment, rather than each member adjusting their personal returns.

Eligible partnerships can elect out of this regime on a timely filed return. To be eligible, the partnership must have 100 or fewer partners (counted by specific rules) and all partners must be eligible partners (individuals, C corporations, foreign entities, estates, or trusts). Partnerships with partnerships or trusts as partners generally cannot elect out. The election must be made every year.

What should you do next?

Close the books, confirm each member's percentages against the operating agreement, and put March 15, 2027 on the calendar, or file Form 7004 by that date. If you want the 1065 and K-1s prepared, or the ones you have reviewed, N&T Tax & Advisory Group does both — by phone or video, wherever the LLC is registered. Book a partnership return review.