K-1 season is when the questions start. Returns are rushed out before March 31. Then they sit with your CPA until October 14th, when all the problems surface at once.

By then, the damage is done.

Real estate K-1s are some of the most error-prone documents in tax filing. The partnership files its return, generates your K-1, and your CPA plugs it in. If nobody checks the underlying detail, mistakes flow straight to your personal return.

Here are three things worth verifying before that happens.

1. Check Your Basis Schedule

Your basis in a partnership determines what you can deduct. If your K-1 shows a $50,000 loss but your basis is only $30,000, you can only deduct $30,000. The rest gets suspended.

The problem is that many K-1s do not include a basis schedule. Your CPA has to build one, and if they are working from incomplete information, the number can be wrong in either direction.

Too low, and you lose deductions you are entitled to. Too high, and you claim losses the IRS will disallow later.

Ask for the basis schedule. Confirm it accounts for contributions, distributions, debt allocations, and prior-year adjustments. This is the foundation everything else sits on.

2. Verify the Debt Allocations

In real estate partnerships, debt is often the largest driver of basis. How that debt is allocated among partners (recourse versus nonrecourse, qualified nonrecourse financing) directly affects how much each partner can deduct.

A common error: the partnership refinances a property and the debt allocation shifts, but nobody updates the K-1 detail. Your share of liabilities changes, your basis changes, and suddenly the loss you deducted last year no longer has support.

Say your share of partnership debt was $400,000 last year and drops to $250,000 after a refinance. That $150,000 reduction hits your basis. If you claimed a $120,000 loss last year based on the higher number, your future distributions may be taxable.

Compare your current-year debt allocation to the prior year. If it moved significantly, find out why. There should be a clear reason: a refinance, a new partner, a capital call. If nobody can explain the change, something is off.

3. Look at the Tax Capital Account

If your tax capital on the bottom left of the K1 is negative, make sure you understand why.

Back to the point about basis - you want to be sure that it's being driven by liability (debt) allocations. Otherwise you may have losses you're not entitled to. And fixing those usually means amendment.

Do Not Wait Until October

The best time to catch a K-1 error is before your CPA files your return. After the IRS sends a notice, it gets expensive fast. If your real estate investments are material to your tax picture, reviewing these three items takes an hour. Fixing them after filing takes months.

Your K-1 is only as good as the attention someone pays to it.