Schedule K-1 → Standardized Summary

K-1 season fails in two directions, and neither is a data-entry problem.

The first is transcription into the wrong box. A K-1 has dozens of boxes and codes, many of which look interchangeable and are not. Box 13 code W and box 13 code A go to entirely different places on a 1040. The number gets typed correctly and lands in the wrong return line, which is invisible on review because the figure agrees to the K-1.

The second is a K-1 that never arrives. Nobody notices an absent K-1 by reading the K-1s they have. You find it by comparing what you received to what you expected, which means building the expectation first.

So this skill does two things a spreadsheet does not: it preserves the code alongside every amount, and it reconciles the population you received against the population you should have.

The gate

This skill will not produce a clean summary unless:

1. Aggregate K-1s foot to the entity return. Where the entity return (or its Schedule K) is available, the sum of each box across all K-1s must equal the entity's total for that line. This is the single strongest test available and most preparers never run it.
2. Ownership percentages total 100%. Profit, loss, and capital percentages each sum to 100.000% across the full set. A set that sums to 94% is missing a K-1.
3. Every amount carries its box and code, plus the source file and page.
4. No amount is inferred. An illegible or ambiguous figure is an exception, never a back-solved plug.

If the entity return is not available, say so — the summary is then unfooted and its scope is limited. Do not present an unfooted summary as though it were reconciled.

Inputs

1. The K-1 PDFs. Ideally the full set for an entity. A partial set can be summarized but cannot be footed.
2. The entity return or its Schedule K — enables the footing test. Ask for it.
3. The expected recipient list — partner, shareholder, or beneficiary schedule. Without it you cannot detect a missing K-1 except through the percentage test.
4. Prior-year K-1s, if available. Year-over-year comparison at the recipient level catches a partner who dropped out, an allocation that changed without an agreement amendment, and a capital account that does not roll forward.

Step 1 — Extract

python3 scripts/extract_text.py --input k1_packages/ --out work/
# add --ocr for scanned K-1s (requires local ocrmypdf; nothing is uploaded)

This writes, per PDF, a page-delimited text layer, every word with its coordinates, and a metadata file flagging pages with no usable text layer. Scanned K-1s must go through the local OCR path before any figure is read from them — reading amounts off a scanned page without OCR produces silent blanks, not errors.

K-1 layouts vary by software (Lacerte, UltraTax, CCH, Drake, ProSystem) but the box numbering is fixed by the form, so anchor on box numbers, not on position. Software-specific supplemental statements are where the detail lives and are the most commonly skipped pages.

Capture, per K-1:

Rules that prevent the common errors:

• Never merge two codes into one line. Box 13 with codes A and W is two rows. Collapsing them destroys the only information that determines where each lands.
• A box with a code and no amount points to a supplemental statement. Go find it. This is the most frequent cause of an understated return.
• Capture footnotes and supplemental statements as their own rows with statement_ref populated. Section 199A information, foreign detail, and at-risk data almost always live there rather than on the face of the K-1.
• Negative amounts and parentheses — preserve the sign exactly as presented. A loss entered as income is a two-sided error.
• Do not normalize codes across entity types. A 1065 K-1 box 13 and an 1120-S K-1 box 12 are different forms. Keep entity_type on every row and never map codes between them.

Write to k1_lines.csv.

Step 2 — Foot and validate

python3 scripts/build_k1_summary.py \
  --lines k1_lines.csv \
  --entity-totals entity_schedule_k.csv \
  --expected-recipients partners.csv \
  --client "Meridian Holdings LP" --tax-year 2025 \
  --out "Meridian Holdings LP - 2025 K-1 Summary.xlsx"

The script runs five tests and refuses to write a clean workbook if any fail:

• Test A — Aggregate footing. For every box/code, the sum across all K-1s equals the entity's Schedule K total. Reported per box, to the cent.
• Test B — Ownership percentages. Profit, loss, and capital each total 100.000%.
• Test C — Recipient completeness. Every expected recipient has a K-1; every K-1 maps to an expected recipient. Both directions — an unexpected K-1 matters as much as a missing one.
• Test D — Internal consistency. Duplicate box/code rows for one recipient, amounts with no box, boxes with a code and no amount and no statement reference, and any full TIN appearing in the data.
• Test E — Entity consistency. One EIN, one tax year, one entity type across the set. Mixed values mean K-1s from different entities or years were commingled, which invalidates the footing test.

Step 3 — Read the output like a reviewer

The workbook has seven tabs:

1. Summary — entity, year, K-1 count, footing result, percentage totals, missing recipients, exception count. The page a reviewer reads first.
2. Footing — box by box: sum of K-1s, entity Schedule K total, difference. Differences read 0.00 or the workbook is marked failed.
3. K-1 Matrix — recipients down, box/code across. The working view: one glance shows which recipient is missing an item everyone else received, which is how a skipped supplemental statement surfaces.
4. Detail — every extracted row with source file and page, for re-performance.
5. State Schedules — state-by-state apportioned amounts and withholding by recipient. Nonresident withholding and composite-return eligibility get decided here, and this is the tab most often missing from a manual summary.
6. Recipient Reconciliation — expected versus received, with status and, where prior-year K-1s were supplied, the change in each percentage and in capital.
7. Exceptions — illegible figures, unresolved codes, ambiguities, and judgment calls with page references.

What to escalate rather than summarize

These surface during extraction and matter more than the summary itself:

• A K-1 marked final for a recipient who still holds an interest, or not marked final for one who exited. Changes basis and gain recognition.
• An amended K-1 superseding one already entered on a filed return — that return needs amending, and the client may not know.
• Percentages that changed mid-year with no corresponding agreement amendment or transfer document.
• A capital account that does not roll forward from prior-year ending to current-year beginning.
• A negative ending capital account — implies distributions or losses in excess of basis and a deficit restoration question.
• Box 20 code Z / Section 199A information that is absent or incomplete. Without it the QBI deduction cannot be computed correctly, and the entity has to be asked. Late in the season this is the item that holds returns hostage, so raise it the moment you see it.
• Foreign items present — may trigger recipient-level reporting the recipient has not been told about, with per-form penalties.
• A recipient type that changes the treatment: an IRA receiving UBTI, an exempt organization, a disregarded entity whose owner is the real taxpayer.

Report these as facts with the K-1 and page. Do not conclude on treatment — route it to the person signing.

Standing rule on tax figures

Do not state a threshold, rate, phase-out, or limit from memory. Where a code's treatment depends on one, write the note as "verify treatment of box X code Y for TY[year] against current instructions for Schedule K-1 (Form [entity type])" and cite the box and code. Codes and their meanings are revised between years; a code letter recalled from an earlier year is a silent misposting.

Security posture

Fully local. Full TINs are never written to output — recipient identification uses name and last four digits only, and the validator fails if a full TIN pattern appears in the data. Output filenames carry entity name and year only. Source PDFs open read-only. No network calls.

Dependencies

pip install openpyxl pdfplumber

Built by Adopt AI — free to use and modify.