17 Oct I have an investment that gives a K-1 form. What does that mean?

Q. What is a K-1? I made an investment and I got a notice that I would get one, and my accountant says they’re often late compared to other tax forms. Is this a problem for my future tax returns to be timely?
— Investor

A. Good question.

It’s not a problem exactly, but something you should understand.

A K-1 is a tax document issued to investors who have income, deductions or credits from pass-through entities, such as Partnerships, S corporations, and trusts or estates, said Matthew DeFelice, a certified financial planner with U.S. Financial Services in Fairfield.

You’ll typically receive a K-1 if you invest in private equity or hedge funds, real estate partnerships or syndications, and publicly traded partnerships (PTPs) or master limited partnerships (MLPs), which are common in the energy and natural resources sectors., he said

These investments are often structured as partnerships or pass-through entities for tax efficiency and flexibility, DeFelice said.

“Because these entities generally don’t pay federal income taxes directly, they `pass through’ their profits, losses, and other tax items to the owners or beneficiaries,” DeFelice said. “Each owner’s share is reported on their individual income tax return using the information from their K-1.”

You’re probably more familiar with 1099s, which are typically issued by banks, brokerage firms, and mutual funds to report interest, dividends, and capital gains you received during the year.

“These documents are what most taxpayers receive, and they show straightforward income amounts,” he said. “Essentially, a 1099 reports direct income paid to you, while a K-1 reports your share of income generated by an entity you partially own.”

Because of this, K-1s can be more detailed, and may include passive income, depreciation, and special allocations to shareholders, DeFelice said.

This is also partially why K-1s often do not get sent until after the April 15th tax filing deadline.

“Additionally, pass-through entities must first complete their own tax returns before generating individual K-1s for the owners,” he said. Many partnerships have complex structures with multiple tiers of ownership, so preparing accurate statements takes time. Tax-filing extensions are common at the partnership level, which cascades delays down to the individual investors.”

Generally speaking, there are no negative consequences to filing an extension, as long as you understand that an extension gives you more time to file, not to pay, he said. Therefore you must estimate and pay any tax due by the regular April deadline.

“So as long as you’ve paid what you owe — or slightly more to be safe — filing an extension has no downside and is often the best, most responsible approach when K-1s are delayed,” DeFelice said. “It is harmless, and a much better option than filing without the K-1 data. This could lead to errors and/or missing income, which can trigger IRS notices or amended returns — both of which are best avoided.”

As always, you should consult a qualified tax professional for advice before filing.

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This story was originally published in October 2025.

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