In many jurisdictions, a partnership tax return is an informational return. This means it is filed with the intention of providing a tax agency with information regarding the income and expenses of the partnership in question. Unlike with other tax returns, however, the filer does not make a payment or receive a refund in relation to the amounts listed on the form. Instead, the partners are usually required to file separate tax returns reporting their shares of the profits or losses from the business. Depending on the calculations in these returns, each partner may be required to make a tax payment or receive a refund.
Partnership tax returns are documents partnerships file with a tax authority. They are usually intended to provide information about the money the partnership has earned, expenses it has paid, gains it has enjoyed, and losses it has suffered. A partnership usually only uses a partnership tax return to report the information that it is legally required by the tax agency. Many jurisdictions do not require a partnership to make a tax payment when filing a return.
The fact that partnership tax returns are usually informational returns does not mean that the partners escape tax liability. Instead, each partner is typically required to file an individual income tax return in addition to the partnership tax return. On an income tax return, each partner will report the share of the partnership’s income or losses that apply to him. He will then make his own tax liability calculations based on his partnership share and figure the amount he owes in taxes. If he owes taxes, he is usually required to pay them when he submits his tax return, but in some cases, one or both partners may receive a refund instead.
Usually, those who file partnership tax returns also create schedules for the partners in the business. These schedules include information about the partner’s share of the income from the partnership as well his share of the business’ losses. Each partner uses his schedule to file his own personal income tax return.
In many cases, a partnership consists of two people running a business together. Sometimes, however, a partnership may include several different people who are all partners in the same business. The number of people involved does not change the number of partnership tax returns that are required, however. Most jurisdictions require one partnership tax return per business, no matter how many partners there are, and a separate return from each partner.