The Internal Revenue Service has revised Schedules K-1 for this year's filing season in an effort to reduce common errors and the burden associated with preparation and filing requirements.
Income, deductions and credits from partnerships, S corporations and trusts are reported to investors on Schedules K-1. The new partnership and S corp Schedules K-1 will be available for the 2004 tax year and the trust Schedule K-1 will be available for tax year 2005. Approximately 25 million Schedules K-1 are filed each year, with the highest number filed by partnerships.
The redesigned schedules feature an improved layout similar to that of Form W-2, as well as streamlined instructions. The schedules are also scannable, to eliminate the risk of transcription errors.
"The revisions to Schedules K-1 will reduce taxpayer or practitioner preparation time, increase quality and improve reporting accuracy," said Larry Gray, governmental affairs liaison for the National Association of Tax Professionals. "The Schedules K-1 are now laid out similar to a Form W-2."
For example, a code for each amount to be reported in Box 13, Other Deductions, is listed on page two of Schedule K-1 (Form 1065) and is similar to the coding system used for Box 12 on Form W-2. By using the code information, the taxpayer or practitioner will know specifically where to correctly report the amount on the taxpayer's Form 1040.
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