Private Equity Fund Tax

Private Equity Fund Tax Services

Form 1065 returns, investor K-1s and carried interest reporting for private equity funds, general partners and management companies.

Serving clients nationwide

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Illustrative private equity fund structureLimited partners and the general partner invest through the fund, which files Form 1065, holds portfolio investments, and issues Schedule K-1s to every partner, including the general partner's carried interest.How a fund reportsCapital in, gains out, a K-1 for every partnerLimited partnersCommit and fund capitalGeneral partnerManages, earns carryThe fund · Form 1065Capital accounts, allocations and the waterfallCompany ACompany BCompany CK-1LP 1K-1LP 2K-1LP 3K-1GP carryK-1s, K-2s and K-3sDelivered on the agreed dateIllustrative example

A fund’s limited partnership agreement sets how capital is called, how profits are shared and when the general partner earns its carry. We prepare your fund’s returns and K-1s around those terms, so investor capital accounts and tax reporting stay in step, from the first capital call to the final distribution.

Funds and sponsors, from first close to final distribution

We work with emerging managers, independent sponsors, funds with feeder and parallel vehicles, and the general partners and management companies behind them.

Emerging Managers

First and second funds

Managers launching a fund who need tax reporting that meets institutional investor expectations from day one.

  • LPA tax provisions reviewed before the first return
  • Capital accounts set up for each investor
  • K-1 delivery dates agreed early
  • Reporting that scales as the next fund launches
Independent Sponsors

Deal-by-deal vehicles

Sponsors raising capital one transaction at a time through single-deal partnerships and co-investment vehicles.

  • Each vehicle’s return prepared consistently
  • Promote and carry allocated under each deal’s terms
  • K-1s for every co-investor
  • Lower-tier K-1s rolled into the vehicle’s return
Funds & Tiered Structures

Funds, feeders and parallel vehicles

Main funds with feeder, parallel and alternative investment vehicles, where income passes through several layers.

  • K-1 coordination across tiers
  • Schedules K-2 and K-3 for investors who need them
  • UBTI detail for tax-exempt investors
  • Foreign partner withholding under Section 1446
GP & Management Company

General partners and management companies

The entities behind the fund that earn management fees and carried interest and pass them through to the investment team.

  • GP entity and management company returns
  • Carried interest allocated among team members
  • Section 1061 three-year holding period reporting
  • K-1s for each member of the team

The tax reporting behind every fund

Investors judge a fund partly by its reporting. We make sure allocations follow your LPA, capital accounts tie out, and K-1s arrive when promised.

Fund Form 1065 and K-1s

Federal and state partnership returns for the fund and its vehicles, and investor K-1s with tax basis capital accounts and the detail each investor’s preparer needs.

Allocations and capital accounts

Allocations that follow the waterfall in your LPA, including the preferred return, catch-up and carry, so each investor’s tax capital account tracks the economics.

Carried interest reporting

Section 1061 reporting so carried interest holders know how much of their gain met the three-year holding period for long-term rates.

GP and management company returns

Returns for the general partner entity and the management company, with K-1s to the members of your team that line up with the fund’s reporting.

Investor-specific reporting

Schedules K-2 and K-3, unrelated business taxable income detail for tax-exempt investors, and withholding and filings for foreign partners.

State composite and withholding filings

State returns wherever the fund has income, composite returns and nonresident withholding for investors, and pass-through entity tax elections where they help.

Across the life of a fund

Fund tax reporting starts at the first close

What shows up on an investor’s K-1 depends on decisions made at launch, at each capital call and at every exit. We stay involved throughout, so the reporting is never a surprise.

  1. Launch

    We read the tax provisions of your LPA and side letters, set up investor capital accounts, and plan the reporting the fund will need.

  2. Capital calls

    Contributions, subsequent closings and equalization tracked in capital accounts, with organizational and syndication costs treated correctly from the start.

  3. Annual reporting

    Fund and vehicle returns, investor K-1s, K-2s and K-3s, and state filings, delivered on dates agreed at the start of each season.

  4. Exits

    Gains from portfolio exits allocated under the waterfall, Section 1061 holding periods tracked for carry, and withholding applied before cash goes out.

  5. Wind-down

    The fund’s final return, final K-1s and closing capital accounts, along with the last state filings.

Fund tax experience, sized for your fund

Big Four work on fund-of-funds structures, cross-border investments and partnership allocations. That is where our fund tax experience comes from, and emerging managers and independent sponsors face the same issues at a different scale.

We start every engagement by reading your limited partnership agreement. Once we understand the waterfall, the carry terms and any side letters, the allocations and K-1s follow from them and stay consistent from year to year.

And because we stay involved year-round, large distributions and exits are reviewed before they happen, not after the K-1s go out.

What working with us looks like

  • A licensed CPA firm serving clients nationwide
  • Big Four partnership and fund tax experience
  • Your LPA’s tax provisions reviewed before your first return
  • A K-1 delivery date agreed at the start of each season
  • Carried interest reporting your team can follow
  • Scope and fees agreed in writing before work starts

From first call to first K-1

  1. Review the fund

    We read your LPA, side letters, subscription documents and prior returns to understand the fund’s terms and its investors.

  2. Build the model

    We set up investor capital accounts and the allocation model under your waterfall, then roll them forward each year.

  3. Prepare and deliver

    Returns are prepared, reviewed and delivered with K-1s on the agreed date, along with the K-2, K-3 and state detail investors need.

  4. Stay ahead

    We check in before year-end and before large distributions, so the tax reporting holds no surprises for you or your investors.

Private equity fund taxes, answered

When will our investors receive their K-1s?
Calendar-year partnership returns are due March 15, and an extension moves the deadline to September 15. Many funds extend because they are waiting on K-1s from the partnerships they invest in. We agree on a delivery date with you at the start of the season, and can provide estimates earlier for investors who need them.
How is carried interest taxed?
Carried interest is generally a profits interest in the fund, so the general partner reports its share of the fund’s income and gains rather than a fee. Under Section 1061, gain allocated to carried interest is long-term only if the underlying asset was held for more than three years, instead of the usual one year. We report the Section 1061 information each carry holder needs to file correctly.
What are Schedules K-2 and K-3, and does our fund need them?
Schedules K-2 and K-3 report items of international tax relevance, such as foreign income, foreign taxes paid and information foreign partners need. Many funds must prepare them, though a domestic fund with no foreign activity and no foreign partners may qualify for an exception if it meets the notification requirements. We check whether your fund qualifies each year.
We have tax-exempt investors. What do they need from us?
Endowments, foundations and retirement plans can owe tax on unrelated business taxable income, often from debt-financed investments or operating businesses held through partnerships. They rely on the fund’s K-1 to identify it, so we report UBTI clearly and can flag it during the year when an investment is likely to create it.
What does the fund need to do for foreign investors?
A fund with foreign partners may have to withhold tax on their share of effectively connected income under Section 1446 and report it on Forms 8804 and 8805. Many funds invest in ways that limit that income, but the exposure has to be checked each year, especially when the fund holds interests in operating partnerships. We handle the withholding filings and the K-3 information foreign investors need.
Do you prepare returns for the management company and general partner?
Yes. We prepare returns for the general partner entity and the management company, and the K-1s to the members of your team, so carry and management fee income are reported consistently with the fund.
Who is the partnership representative, and why does it matter?
Under the centralized partnership audit rules, every partnership return names a partnership representative, who has sole authority to deal with the IRS in an audit. For a fund, that is usually the general partner or someone it designates. We help you make the designation each year and explain the options available if an audit adjustment is made.
Do you work with funds outside Virginia?
Yes. We work with fund managers and sponsors across the country, and everything can be handled remotely. We prepare the state returns, composite filings and nonresident withholding each state requires for your fund and its investors.

Bring us your fund documents early

Request a free consultation. Share your LPA or offering documents, and we’ll walk through the filings your fund needs, the K-1 timeline and the reporting your investors will expect.

Request a Free Consultation