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A partnership files an annual information tax return with the IRS, Form 1065, stating all items of taxable income and tax deductions. Included is Schedule K-1 which details each partner's share of taxable income and tax deductions
. If you are a member of a partnership that carries on a trade or business, your distributive share of partnership income or loss is taxable to you on your tax return
. It makes no difference whether or not the partnership profits were distributed, they are still taxable on your tax return. Partnership income that is not withdrawn increases the value of your capital account.
Report the partnership income on the Form 1040 as indicated on Schedule K-1 of Form 1065. The net earnings from self employment are shown on Schedule K-1 of Form 1065. Figure your self employment tax on Form 1040, Schedule SE. Do not attach Form 1065 or it's Schedule K-1 to any personal tax return filed.