Business Entity Types

Introduction to U.S. Partnership Taxation: How Income Flows Through to Partners (Form 1065)

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Written byLipai WangFounder · IRS-registered tax professional

Key Takeaways

Partnership income flows through to partners — no entity-level tax
Form 1065 is due March 15 with K-1s for each partner
Partnerships avoid double taxation
Foreign partners may face withholding under Section 1446

How Partnership Income Flows Through

In a U.S. partnership, the entity itself does not pay income tax. All income, deductions, credits, and losses flow through to the individual partners via Schedule K-1. The partnership files Form 1065 as an information return.

No Double Taxation

Unlike C corporations, partnerships are taxed only once at the partner level. Partners pay tax on their share of income regardless of whether it is actually distributed to them.

Form 1065 Filing

Partnerships file Form 1065 by March 15 (calendar year). Each partner receives a Schedule K-1 showing their allocation. For foreign partners, additional withholding requirements may apply under Section 1446.

Frequently Asked Questions

Does a two-member LLC file as a partnership?

Yes, unless it has elected corporate tax treatment.

What about foreign partners?

Foreign partners may be subject to withholding under Section 1446 on their share of effectively connected income.

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