What is the use of a K-1 form?

The K-1 form is used to report income, deductions, and credits to partners in a partnership, shareholders of an S corporation, or beneficiaries of estates and trusts. Each partner or shareholder receives a K-1 detailing their share of the business's income, losses, and other tax-related information for the year. This allows individuals to accurately report their earnings on their personal tax returns and ensures that the correct amounts are recognized and taxed at the individual level, rather than at the business level. The K-1 is pivotal in pass-through entities where the income is taxed directly to the individuals involved, rather than the entity itself.

In other contexts, such as payroll or estate documentation, different forms serve those specific purposes, highlighting why the other options do not align with the function of the K-1.