MLPs offer excellent yields, but if you hate paperwork come tax time, MLPs are not for you. First you have to wait at least till March 15th before filing taxes. That’s the latest you receive your MLP specific tax document called Schedule K-1s. You’ll receive one for each MLP you own and they are sent directly by the partnership firm, not by your broker.
What is a Schedule K-1?
A Schedule K-1 is used to report taxes on Trusts and Estates (IRS form 1041), S corporations (IRS form 1120S) and more commonly, Partnerships (IRS form 1065). This article deals with form 1065 meant for MLPs (Master Limited Partnerships).
When you hold a stock from an MLP, you are deemed a partner, and as a partner, responsible for your share of the taxes. MLPs use Schedule K-1 to report your share of income, gains, losses, credits and deductions.
Since you, the unitholder, pay taxes, MLPs don’t have to pay corporate income tax.
TurboTax and Schedule K-1
As if this extra paperwork isn’t enough pain, MLPs mail you paper copy of Schedule K-1s. Which means, you have to manually enter the numbers from the form into TurboTax or your favorite tax software.
And you have to do this once for each MLP you own!
But, there is a way to view and import your Schedule K-1s into TurboTax without having to enter all those numbers!
How to access Schedule K-1s online or what to do if you did not receive yours
If you did not receive your Schedule K-1s or if they were lost in mail, you can still access your K1s online. Here’s a detailed step-by-step walkthrough on how to do this. (If you are reading this on a RSS reader, you will miss out on the slideshow!):
STEP 1: Goto https://www.taxpackagesupport.com
STEP 2: Register for online access to your Schedule K-1s
STEP 3: Setup your login. You need to do this only once for all K1s
STEP 4: Enter SSN and your last name to add this MLPs K1 to your access list. You have to do this only one per MLP
STEP 5: You are ready to view your Schedule K-1 online!
STEP 6: Your Schedule K-1 in all its glory! Notice the TurboTax tab!
STEP 7: Using TurboTax!This will download a TXF (Tax eXchange Format) file to your computer
STEP 8:To import your TXF file to Turbo Tax, first goto https://www.schedulek-1.com/
STEP 9: Scroll down to the bottom and click on
TXF to OFX conversion and hosting link
STEP 9: Upload the TXF file your downloaded in STEP 7 so that this can be hosted and read by TurboTax
STEP 11: Now logon to TurboTax. Goto Federal Taxes..Wages and Income..Easy Import..Import From A Financial Institution
FINAL STEP: Check your inbox for an email from schedulek-1.com. You should have the filenumber and password to import your Schedule K-1 to TurboTax! How cool is that!
You can use the above information to not just import your Schedule K-1 info to TT but also to verify the information is correct, to access your K1s as soon as it is made available and to be notified when it is available! If you lose your K-1, no worries! You can get it online using the above instructions.