Partnership Taxation – Form 1065 & K1
A partnership is considered a pass-through entity for tax purposes, meaning that the liability is transferred to the holding partners.
Partners are categorized as either “general” or “limited” according to their role in the partnership.
In most cases, the partnership is required to withhold at source, on a quarterly basis, from its foreign holding partners.
Tax withholding at source is taken at the highest bracket of 39.6% for foreign holding partners.
Thus the US tax authorities ensure that foreign individuals submit returns in order to receive rebate.
A partnership report (1065) is solely informative and must be submitted by 15.03 of the following year or 15.06 in case books were kept outside the US.
The partnership produces each partner a K-1 form, required as an addendum to the personal tax statement.
It is also required to provide a non-citizen individual with form 8805, confirmation of tax withholding at source.