How is income reported on Schedule K-1 taxed compared to the 1099 form?

Schedule K-1 income is reported on Schedule E and may be passive or active. 1099 income is often reported on Schedule C and taxed at ordinary rates plus self-employment tax.

What are the key differences between 1099 and K-1 forms?

1099s are used for freelance, interest, and dividend income, while K-1s are for pass-through entities like partnerships and trusts.

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What is the difference between a K1 and 1099?

Q: What distinguishes Form 1099 from Schedule K-1 in terms of tax implications?

Form 1099 income is often subject to self-employment tax, especially for freelancers. K-1 income from passive sources is usually not.

Q: When do you receive a K-1 vs a 1099?

1099s are typically sent by January 31. K-1s are issued by March 15 after the business files its own return.

Q: Is K-1 income taxable?

Yes, all K-1 income must be reported and is taxable, though it may not be subject to self-employment tax if it is passive.

Daan Durlacher

4 min

Published on: 13-05-2022 Last modified on: 11-06-2025

Many Americans Overseas receive unfamiliar tax forms such as Schedule K-1 or a Form 1099. Understanding the difference is crucial for tax compliance — especially since the tax implications, filing deadlines, and income reporting vary significantly.

What is a 1099?

Form 1099 is used to report various types of non-employment income to the IRS. If you are an independent contractor, investor, or receive certain types of income, you may get one or more types of 1099 forms.

Common 1099 variants include:

1099-INT – Interest income from bank accounts (threshold: $10)
1099-DIV – Dividend income from investments (threshold: $10)
1099-MISC – Miscellaneous income such as rent or royalties (threshold: $600)
1099-NEC – Non-employee compensation for freelance work (threshold: $600)
1099-K – Payment card or third-party network transactions, such as PayPal or Venmo (threshold: $600 or 200+ transactions depending on state rules)

Income from a 1099 may be subject to self-employment tax (15.3%), especially for freelancers or contractors. This type of income is typically reported on Schedule C or Schedule B (for interest/dividends).

What is a K-1?

A Schedule K-1 is used to report income, deductions, and credits from pass-through entities. These forms are issued to partners, S corporation shareholders, and beneficiaries of trusts and estates.

There are three main K-1 variants:

Form 1065 Schedule K-1 – For partnerships
Form 1120-S Schedule K-1 – For S corporations
Form 1041 Schedule K-1 – For trusts and estates

K-1 income is usually reported on Schedule E of your personal tax return. Whether the income is passive or activeaffects whether it is subject to self-employment tax. Most K-1 passive income is not subject to this tax.

Key Differences Between a K-1 and 1099

Feature	Form 1099	Schedule K-1
Used for	Freelancers, investors, other income	Partners, shareholders, beneficiaries
Tax form reporting	Schedule C / B	Schedule E
Self-employment tax	Yes (for NEC or MISC)	Generally no
Tax classification	Typically active income	Passive or active income
Complexity	Usually simple	Often complex

When do you receive a K-1 or 1099?

Form 1099 is usually issued by January 31.

Schedule K-1 forms are typically issued by March 15.

Why the delay with K-1s?

K-1s depend on the business’s tax return (Form 1065, 1120-S, or 1041) being filed first. This often leads to late-arriving forms, which may delay personal tax filing.

Practical examples

Example 1:

Emily freelances online and receives a 1099-NEC from a U.S. company. She reports this on Schedule C and pays self-employment tax.

Example 2:

Tom is a passive investor in a real estate partnership. He receives a Form 1065 Schedule K-1. He reports the income on Schedule E, without self-employment tax.

Example 3:

Sarah works as a contractor (1099-NEC) and also owns shares in an S corporation (1120-S Schedule K-1). She must report both forms separately and pay taxes accordingly.

Frequently asked questions

What distinguishes Form 1099 from Schedule K-1 in terms of tax implications?

1099s often trigger self-employment tax; K-1s typically do not. K-1s report pass-through income from businesses or estates.

How is income on Schedule K-1 taxed compared to a 1099?

It depends on whether the income is passive or active. Passive K-1 income is not subject to SE tax, while 1099 freelance income is.

When do you receive a K-1 vs a 1099?

1099s are usually sent by January 31. K-1s follow by March 15 or later due to business tax return schedules.

Is K-1 income taxable?

Yes. Even if it’s passive, all K-1 income must be reported on your U.S. tax return.

Additional resources

Americans Overseas can help you with your K-1 and 1099

If you’re an American living abroad, understanding the nuances of K-1 forms and 1099 forms can be challenging. Americans Overseas offers a large independent network of U.S. tax accountants and financial planners who specialize in helping Americans living overseas.

Americans Overseas offers a large independent network of US tax accountants and financial planners, specialized for Americans living abroad. Based on your personal situation, we provide information and introduce you to the appropriate expert in our Americans Overseas network, free of charge and free of any obligation.

Written by Daan Durlacher

Co-founder

Daan Durlacher, co-founder of Americans Overseas, belatedly discovered his US Person status and associated tax liability. He founded the company with Michael Littaur in 2012 to inform and assist others with U.S. tax issues.