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!):