The Role of K-1 Tax Forms in Oil and Gas Investing

Every year, before the annual deadline of March 15th, Crown Exploration clients receive a Schedule K-1 tax form, which reports their income, losses, and deductions from the Joint Venture. Essentially, K-1s enable investors to incorporate their share of the Venture’s financial results into their individual tax returns. Understanding the nuances of depletion allowances and other deductions specific to the Oil and Gas industry is vital for optimizing tax strategies. As the deadline to file approaches, Joint Venturers should coordinate with their tax professionals to ensure that all available tax benefits associated with their investments are reported. If you have questions about your Schedule K-1, contact our Investor Relations team today.  


K-1 Income and Reporting Tax Information

At the start of the year, business owners are issued Schedule K-1 income earned from a partnership. In this guide, we will navigate you through how to figure out your K-1 for tax reporting.

In this article:

  • What is a Schedule K-1?
  • K-1 issuance deadline
  • Who has to file K-1 income?
  • K-1 reporting

What Is a Schedule K-1?

Think of a Schedule K-1 as a W-2 or 1099. It reports annual income earned from a business. More specifically, a Schedule K-1 reports an owner’s share of profit/loss of pass-through business entities. Pass-through entities push business tax liability to the owners, to report on their individual tax returns.

Who Files a Schedule K-1?

Whether you file K-1 income totally depends on your business structure. Partners of partnerships will be issued a Schedule K-1.

Partnerships report taxes using Schedule K-1 Form 1065.

K-1 Issuance Deadline

K-1’s are issued to all partners by March 15th each year. Companies will divide income and losses to each partner based on several factors. Essentially the K-1 reports the owner’s share of the company from the original agreement and any amendments to said agreement.

Companies make sure that the cumulative K-1’s issued equal total earnings for the business.

What Is Reported on a Schedule K-1?

A Schedule K-1 will show your percentage of profits, gains, losses, and deductions from a business. As an owner, you are responsible for filing these items on your personal tax return. The most common figures you will see on your K-1:

• Production Income from the Joint Venture

• Gains or losses

• Capital account additions and distributions

• Deductions for intangible drilling costs and cost depletion

K-1 Income

Pass-through entities avoid double taxation by passing all income to the owners. K-1 income shows your share of that income out of how much the business entity made.

K-1 Reporting

When you are the owner of a partnership, you agree to share the responsibilities of the business. That means no matter what, your tax return needs to match what is reported on your Schedule K-1.

K-1 Income Basis Reporting

K-1 income needs to be filed on your individual taxes each year. Without accurate reporting on your return, you run the risk of a penalty for misstating your share of a business and will need to make an amended return. Remember, your tax filing must match what is reported on your K-1.

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