K-1 forms are a key part of managing taxes for solopreneurs running an S Corp or multi-member LLC taxed as an S Corp. Automation makes the process seamless, handling salary optimization, compliance, and reporting with precision so filings stay accurate and tax benefits are fully realized.
The K-1 looks complex, but its job is simple: it breaks down your share of S-Corp income so you can see what’s taxed as salary and what counts as distributions.
It works by giving you the same tax advantages big corporations enjoy. Instead of profits being taxed twice, S Corps and partnerships use K-1s to pass income and losses directly to owners, helping maximize deductions and reduce taxable income.
Ready to start saving smarter? Lettuce runs your payroll, files your taxes, and keeps you compliant, so you can focus on growing your business and keep more of what you earn. Get started today and see how much you could save.
The “K-1 form” you hear about at tax time is officially called Schedule K-1. Most people just use the shorter name, but they’re the same thing. This IRS document, usually one page long, shows how much of your business’s profits (or losses) belong to you personally. If you run your business as an S Corporation, partnership, or certain LLCs, the IRS requires a Schedule K-1 each year.
Here’s the key: you don’t sit down and fill out a K-1 the way you would a 1040. Instead, it’s prepared as part of your business’s annual tax return (Form 1120-S for S Corps or Form 1065 for partnerships). For solopreneurs, you’re responsible for making sure the K-1 gets filed with the IRS, but as the individual owner, you simply receive a copy and use the numbers on it when filing your personal taxes.
Think of it like this: employees get a W-2, and business owners get a K-1. The company issues the K-1, and you plug it into your return.
Why it matters: The K-1 makes S Corp tax savings possible. Say your business earns $100,000. You pay yourself a reasonable salary of $60,000 (with payroll taxes), leaving $40,000 in profit. That $40,000 appears on your K-1 and flows to your personal return. The benefit? You’ll pay income tax, but skip the 15.3% self-employment tax you’d face as a sole proprietor, saving $6,120.
Not every business uses a K-1, but it’s a must for pass-through entities. The form makes sure the IRS knows exactly how business profits and losses are divided among the owners, whether that’s multiple partners or just you as a solopreneur. Understanding who prepares a K-1 and who receives one clears up the confusion about how this form fits into your taxes.
Your business prepares the K-1, not you personally.
Even if you’re a solopreneur with an S Corp, the IRS still sees your business as a separate entity. Each year, your S Corp files its own business tax return and generates a K-1 that shows how much profit belongs to you.
You’ll get a copy of that K-1 to use when you file your personal taxes; it’s how your business tells the IRS, “Here’s what this owner earned.”
Any owner of a pass-through business receives a K-1. That includes partnership partners, shareholders in S Corporations, and LLC members taxed as partnerships or S Corps. Even if you’re a solopreneur running a single-member LLC with an S Corp election, you’ll still get a K-1, even though you’re the only owner. This document ties your business income to your personal tax return, ensuring the IRS sees the allocation clearly.
For solo business owners, the advantage is clear: your K-1 reflects a smarter split between salary and distributions, helping reduce self-employment taxes and often saving thousands each year.
Sole proprietors and C Corporations don’t issue K-1s. Sole proprietors report all business income directly on Schedule C, and C Corps pay corporate tax instead of passing income through to owners.
The IRS pays close attention to how S Corp owners pay themselves. Your salary proves you’re treating your business like a real company, while your K-1 documents the profits you keep as distributions. Together, they strike the balance that unlocks tax savings without creating audit risk.
The challenge is that “reasonable compensation” isn’t a fixed number. It depends on your role, what others in your field earn, and how much your business brings in. A common starting point is the 60/40 rule of thumb, allocating around 40% of your net income to salary and 60% to distributions, or vice versa, but the right mix varies.
Why it matters:
Too little salary looks like tax avoidance and raises red flags.
Too much salary erodes the tax advantage you set up your S Corp to capture.
By paying yourself right and letting the K-1 record the rest as distributions, you keep more of what you earn while complying with IRS rules.
Don’t leave your salary or K-1 filings up to chance. With Lettuce, payroll, distributions, and compliance run automatically, so you maximize savings and stay fully audit-ready. Start today and see how effortless tax season can be.
A Schedule K-1 moves through two steps each year: first at the business level, then at the personal level.
An S Corporation, partnership, or LLC taxed as one prepares a K-1 for each owner as part of its annual business return.
For S Corps, the K-1 attaches to Form 1120-S; for partnerships, it attaches to Form 1065.
The business files these with the IRS and must send each owner a copy by March 15, giving you time to use it for your personal tax return due April 15.
When you receive your K-1, you don’t file it separately. Instead, you use the numbers on it to complete your personal return.
For S Corp shareholders, the K-1 shows your share of income, deductions, and credits, which flow through to your Form 1040.
Tax software and preparers prompt you to enter the K-1 details correctly, just like with W-2s or 1099s.
Filing and reporting K-1s doesn’t have to be confusing or stressful. With Lettuce, your K-1 is automatically generated, delivered on time, and formatted in your tax return for easy use.
You've got questions about K-1 forms, and we've got straightforward answers. These are solopreneurs' most common concerns when navigating S Corp taxation and K-1 reporting.
A K-1 lists your share of business income, deductions, credits, and other tax items. Think of it as the bridge between your business finances and your personal tax return.
Yes. Even if you’re the only owner, an LLC taxed as an S Corp issues a K-1 yearly to report your full share of the profits.
You don’t send the K-1 to the IRS yourself. Instead, you use the numbers on it to complete your Form 1040, just like you would with a W-2 or 1099.
Because K-1 income doesn’t have automatic tax withholding, it factors into your quarterly estimated payments. Planning keeps you from facing a surprise bill at tax time.
Yes. The income on your K-1 is part of what you use to calculate your quarterly estimated taxes, alongside your salary and other income.
An incorrect or late K-1 can hold up your personal tax return. If changes are needed, you’ll receive a corrected form and may need to amend your return.
K-1 forms are the key that enables S corporation owners to realize the primary tax benefit of the business structure, but they only work if handled correctly. With millions of Schedule K-1s filed yearly, manual prep and guesswork often lead to errors, delays, and lost savings.
Lettuce eliminates that risk. Our automated system calculates your optimal salary, generates accurate K-1s, and manages every S Corp compliance deadline in the background. You get real-time tax projections, audit-ready records, and the confidence that every detail is handled.
For many solopreneurs, that adds up to $8,000–$15,000 in annual savings. Your energy belongs in your business, not buried in tax paperwork. Get started today and discover how much you could save with Lettuce.