How to File IRS Form 1065: A Step-by-Step Guide for Partnerships in Southern California

If you operate a partnership or an LLC classified as a partnership in the U.S., you’re likely required to file IRS Form 1065 — the U.S. Return of Partnership Income. Whether you're running a family-owned restaurant in Anaheim, a real estate venture in Riverside, or a consulting partnership in Los Angeles, filing Form 1065 correctly is essential to stay compliant and avoid penalties.

At Tax N More Services LLC, we help individuals and small businesses across Southern California understand and complete their tax obligations — including partnership returns. In this guide, we walk you through what Form 1065 is, who must file it, and the step-by-step process to file it accurately. What is IRS Form 1065? IRS Form 1065 is the federal tax return that partnerships use to report income, deductions, gains, losses, and other financial details of the business. Unlike corporations, partnerships don’t pay income taxes directly. Instead, profits and losses “pass through” to the partners, who report them on their tax returns via Schedule K-1. Who Must File Form 1065?

You must file Form 1065 if:

• You operate a partnership or multi-member LLC (not taxed as a corporation)

• Your business earned income or incurred expenses, even if minimal

• Your business is based in the U.S. or has income connected to the U.S.
  

Note: Even if your partnership had no income, the IRS still requires Form 1065 to be filed if the partnership is active.

Step-by-Step Process to File IRS Form 1065

Step 1: Gather Required Information

Before starting Form 1065, collect all financial records and documents, including:

• Your Employer Identification Number (EIN)

• The partnership agreement

• Profit and loss statements

• Balance sheet

• Details of partner contributions and ownership percentages

• Records of income, expenses, assets, and liabilities
  

If you use QuickBooks or another accounting platform, exporting this data will simplify your preparation. Tax N More Services LLC can also help you generate accurate financials from your bookkeeping system.

Step 2: Complete Basic Business Information

Start by entering your partnerships:

• Name and address

• EIN

• Business activity code (NAICS)

• Type of business

• Accounting method (cash, accrual, or other)

• Start date of business

• Total assets
  

This foundational info sets the stage for the rest of the return.

Step 3: Fill Out Income and Deductions (Page 1 of Form 1065)

Next, enter:

• Gross receipts or sales

• Cost of goods sold (COGS), if applicable

• Gross profit

• Ordinary business income or loss
  

Then, report your deductible business expenses such as:

• Salaries and wages

• Rent

• Repairs and maintenance

• Depreciation

• Utilities

• Professional services

• Office supplies
  

Tip: Proper categorisation in your QuickBooks file is critical here. Misclassified expenses could raise red flags or result in missed deductions.

Step 4: Complete Schedule B

Schedule B contains yes/no questions about the partnership structure, ownership, accounting method, and foreign transactions. It also asks about:

• Partnership liabilities

• Transfers of partnership interest

• Foreign partners

• Use of virtual currency
  

Be accurate here, as incorrect answers could trigger an IRS audit.

Step 5: Fill Out Schedule K

Schedule K summarises each partner’s share of the partnership’s income, deductions, credits, and other financial items. This includes:

• Ordinary business income

• Rental income

• Interest and dividends

• Capital gains or losses

• Section 179 deductions
  

This schedule is the bridge between the business tax return and each partner’s personal return.

Step 6: Prepare Schedule K-1 for Each Partner

Each partner receives a separate Schedule K-1 (Form 1065), which shows their share of:

• Income or loss

• Credits

• Deductions

• Distributions
  

Each partner will use this information when preparing their individual tax return (Form 1040). If you’re based in Southern California, keep in mind that partners may also have state tax filing obligations with the California Franchise Tax Board (FTB).

Step 7: Complete Other Schedules (M-1, M-2, and L)

These parts of the form help reconcile your accounting records with the tax return and explain differences between book and tax income. Many small partnerships must complete:

• Schedule L: Balance sheet per books

• Schedule M-1: Reconciliation of income per books with income per return

• Schedule M-2: Analysis of partners’ capital accounts

Step 8: File the Return

The deadline to file Form 1065 is March 15 (for calendar-year filers). You can:

• File electronically using tax software

• Mail it to the appropriate IRS address

• Work with a tax professional like Tax N More Services LLC
  

Missing the deadline can result in penalties of $220 per partner per month, so it’s essential to file or request an extension on time.

How Tax N More Services LLC Can Help You File Form 1065

Filing Form 1065 requires accurate data, deep tax knowledge, and careful attention to IRS rules. That’s where we come in. At Tax N More Services LLC, we help Southern California partnerships:

• Organize financials using QuickBooks or manual records

• Prepare and file Form 1065 and K-1s

• Ensure compliance with IRS and California tax rules

• File state partnership returns, including with the CA FTB

• Minimize errors and avoid penalties
  

Whether you're a new partnership or have years of filings behind you, our team is here to make tax season stress-free.

Need Help Filing Your Partnership Tax Return?

Let us take the burden off your shoulders.Visit www.taxnmoreservices.com or call today to schedule your free consultation.Serving individuals and small businesses throughout Los Angeles, Riverside, Orange County, and surrounding areas.