What Is an LLC 1065 Filer? (Everything You Should Know)

Published by Delina Chantel Yasmeh | Author

Last updated: November 17, 2024

FACT CHECKED by Lou Viveros, Growth & Transition Advisor

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Understanding Form 1065 is crucial for LLC owners to comply with tax regulations and report accurate financial information. Filing this form correctly ensures proper tax liability allocation and avoids potential penalties.

After dedicating countless hours to research and gaining extensive expertise in tax regulations, I am going to present you with a comprehensive guide on LLC 1065 filers.

This article provides direct and informative content on each step of Form 1065 filing, eligibility, reporting income and deductions, deadlines, tax implications, and record-keeping.

Quick Summary

What Is An LLC 1065 Filer?

An LLC 1065 filer refers to a Limited Liability Company (LLC) that files IRS Form 1065, also known as the "Partnership Return of Income."

This form is used by partnerships, including multi-member LLCs, to report their income, deductions, and allocations among partners to the IRS [1].

According to the IRS, an LLC 65 filer should be familiar with Form 8825 (Entity Classification Election), which details their rental real estate activity if applicable [2].

There are requirements for an LLC 1065 filer to qualify as such, and it is important to know those if planning on filing Form 1065 with the IRS.

A limited liability company (LLC) cannot be treated as a partnership for tax return purposes unless at least two members sign LLC articles of organization.

They should also agree that they would share profits, losses, and draws (distributions) from the LLC as per their agreement.

Eligibility and Requirements for LLCs to File Form 1065

To be eligible for Form 1065 filing, an LLC must be classified as a partnership for tax purposes.

This classification is automatic for multi-member LLCs, but single-member LLCs can be treated as disregarded entities or be taxed as corporations.

Multi-member LLCs with at least two members must file Form 1065 unless they meet specific exceptions. For 2019, there were 3.8 million partnerships, representing over 25.3 million partners, indicating the vast number of entities navigating these requirements, according to the IRS tax statistics [3].

Multi-member LLCs with at least two members must file Form 1065 unless they meet specific exceptions.

Certain single-member LLCs, qualified joint ventures, and LLCs with less than $250,000 in gross receipts may be exempt from filing Form 1065, as noted in the TaxSlayer article [4].

Additionally, certain domestic and foreign corporations and S corporations are not required to file this form.

Form 1065 generally applies to multi-member LLCs, as it reflects the partnership's financial information, including income, deductions, and member allocations.

Single-member LLCs, unless elected to be treated as corporations, report their income and expenses on their personal tax returns, avoiding needing Form 1065.

However, it's important to note that, as per the same IRS tax statistics mentioned above, limited partnerships constituted only 9.9% of all partnerships in 2021, yet reported 28% of the profits, showcasing the diversity in partnership structures and financial outcomes.

Structure and Content of Form 1065

Form 1065 consists of several sections addressing specific aspects of the partnership's financial information.

The sections include: 

• Partner Information
• Schedule B - Other Information
• Schedule K - Partner's Distributive Share Items
• Schedule L - Balance Sheets per Books, and many more

Each part of Form 1065 provides the IRS with comprehensive information about the LLC's financial activities. Understanding the purpose of each part is essential for accurate and compliant filing.

Completing Form 1065 accurately is crucial to avoid IRS penalties and delays.

Common mistakes include: 

• Incorrect allocation of income
• Failing to report all deductions
• Omitting required schedules

Utilizing top tax software for an LLC or seeking assistance from a tax professional can help avoid these errors.

Do I Need to File Form 1065 If My LLC Has No Income or Expenses?

According to the IRS, you may not need to file Form 1065 if your limited liability company has no income or expenses.

Thus, you don't have to file Form LLC-1065 with the Internal Revenue Service.

Furthermore, if your LLC is inactive for the year (meaning no business transactions occurred), you will not need to file a return.

On the other hand, if your LLC had income but no expenses, you would still need to file Form 1065 and report the net income on line 17 of that tax form.

Whether you have to file Form 1065 or not, it is always good to have your income reported to the IRS, as it will make your LLC more legitimate and protect you from liabilities incurred by the business.

"Every domestic partnership must file Form 1065, unless they both receive no income and have no expenses that are treated as deductions or credits for federal income tax purposes."
- Jon Morgan, CEO, Co-Founder & Editor-in-Chief of Venture Smarter

Filing of Form 1065

Filing a business income tax return is required for LLCs with business income and expenses during the year. The form reports income, losses, deductions, and credits.

This return also provides information to the IRS about the business entity itself, such as its name, address, and EIN (Employer Identification Number).

Partnerships are not subject to self-employment taxes but are taxed on their share of the income. It applies to foreign partnerships as well.

The form is due by April 15th of the following year and can be filed electronically through IRS e-file or by mailing in a paper copy of the federal tax form.

Late or missed filings of Form 1065 can result in significant penalties imposed by the IRS. These penalties can increase over time, making timely filing essential to avoid unnecessary financial burdens.

LLCs can request an extension to file Form 1065 by filing IRS Form 7004. This extension grants six months to submit the partnership tax return, as per IRS [5].

However, it is essential to note that an extension to file is not an extension to pay taxes owed.

Record-Keeping and Documentation for Form 1065

Keeping comprehensive and accurate financial records is essential for filling out Form 1065 accurately. Well-organized records also simplify the process of preparing Schedules K-1 for each member.

Adopting best practices for record-keeping, such as using accounting software and organizing receipts and documentation, can streamline the tax preparation process and facilitate IRS audits if necessary.

LLCs should retain relevant documents, including income statements, balance sheets, invoices, and expense receipts, to substantiate the information reported on Form 1065. These records serve as evidence in case of an IRS audit.

Does My LLC Need To File 1065?

Your LLC must file Form 1065, the U.S. Return of Partnership Income, if it has more than one member. This form is essential for reporting the LLC's profits, losses, deductions, and credits.

To help you and your company pay a corporation income tax return, it is best to consult an attorney from a reputable law firm or a CPA for advice on federal income tax.

FAQs

References:

1. https://www.irs.gov/businesses/small-businesses-self-employed/llc-filing-as-a-corporation-or-partnership
2. https://www.irs.gov/forms-pubs/about-form-8825
3. https://www.irs.gov/pub/irs-pdf/p1136.pdf#page=21
4. https://support.taxslayerpro.com/hc/en-us/articles/360009292773-Creating-a-Basic-Form-1065-U-S-Return-of-Partnership-Income
5. https://www.irs.gov/forms-pubs/about-form-7004