An investor in an MLP receives a K-1 schedule from the MLP stating the investor’s portion of the MLP’s net income. 1 The income from an MLP is not tax-deferred if the units are held in an IRA, eliminating the tax benefits of an MLP investment.

What happens if I don’t get a k1 form?

If you can’t file on time because you did not receive your K-1 timely, you will need to file an extension. This is done on Form 2848, Application for Automatic Extension of Time to File U.S. Income Tax Return. Failure to pay the tax then will result in interest and penalty.

Do you have to file a K-1 for a MLP?

Unfortunately that special treatment comes at the price of an annoying K-1 tax form each year at tax time. K-1 tax reporting is one of the largest annoyances about buying partnership structures (MLPs, LPs). MLPs don’t pay taxes, you do.

When do I get my MLP tax form?

But, MLP investors pay a high price at tax time. MLPs give their investors K-1 forms. These are notoriously complex forms that require careful accounting (not to mention they don’t typically get mailed out until March ). This post isn’t designed to replace an accountant. MLP investors should probably hire one of those.

Is there a pass through on a K-1 form?

While K-1 forms result in extra work for investors (or their accountant), the pass-through benefit allows MLPs to avoid the double-taxation associated with investments in C-Corporations. The passage of the Tax Cut and Jobs Act of 2017 maintained the tax advantage of the MLP structure but also brought some changes for MLP investors ( Read More ).

How are MLP distributions taxed in the US?

The majority of MLP distributions are generally tax-deferred, with the remainder taxed as ordinary income in the current year. MLP investment products provide exposure to MLPs without the hassle of K-1 forms but have their own tax and suitability nuances to consider.