Will my partnership need to file Schedules K-2 and K-3?

Most likely. The IRS’s FAQs on Schedules K-2 and K-3, released in mid-February 2022, clarified that many partnerships and S corporations, including those that do not have foreign assets or operations, may need to file the new forms: “In many instances, a partnership or [...]

By |2022-03-04T12:49:15-05:00March 3rd, 2022|

Why is the IRS requiring these?

Formerly, Form 1065 Schedules K and K-1 did not require any specific format to provide international information. As a result, many details needed for the accurate preparation of partners’ individual income tax returns were either lumped together on Schedule K-1, lines 16 and 20c, [...]

By |2022-03-04T12:12:34-05:00March 3rd, 2022|

What are the new Schedules K-2 and K-3?

Schedule K-2 is a new 19-page form with 11 total parts. It is filed as part of your Form 1065, Partnership Tax Return. It is basically an expansion of Schedule K to provide greater detail on items of international tax relevance from the operation [...]

By |2022-03-06T11:22:01-05:00March 3rd, 2022|

Is there anything else we need to know?

At the time of this blog post, the IRS was still making changes to its approach to Schedules K-2 and K-3 in response to push-back from tax professionals and other parties. In particular, the American Institute of Certified Public Accountants (AICPA) and other organizations [...]

By |2022-03-04T12:35:43-05:00March 3rd, 2022|

What should we do if we don’t receive a Schedule K-3?

If you typically receive Schedules K-1 from partnerships and you are expecting Schedules K-3 this year, then you will generally need to wait for them before you can file your S corporation return. If you are expecting a 2021 Schedule K-3 but do not [...]

By |2022-03-04T12:36:53-05:00March 3rd, 2022|

Will we be able to e-file this year?

Yes. The IRS has released a timeline for accepting e-filed returns with the new Schedules K-2 and K-3. S corporation returns are slated for the middle of the year: Form Number                            [...]

By |2022-03-04T15:28:26-05:00March 3rd, 2022|

What happens if we don’t file the Schedules K-2 and K-3?

The penalty for failing to file or filing an incomplete Schedule K-2 or K-3 is $10,000. This penalty can be applied at both the entity level and the individual shareholder level. The IRS has provided temporary relief for this penalty for 2021 under Notice [...]

By |2022-03-04T14:50:07-05:00March 3rd, 2022|
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