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 of the partnership. The Schedule K-2 may also include certain international informational forms, such as Forms 5471, 8858, 926, 8621, and 8992. Many of these forms have a $10,000 penalty for failure to file.
Schedule K-3 is a 20-page form with 13 total parts. Like a Schedule K-1, a Schedule K-3 is provided to each partner to provide information on that partner’s share of pass-through items from the business. In this case, it provides details on that partner’s share of international items reported on Schedule K-2. It also provides the pass-through data needed for any international informational forms (such as Forms 5471, 8858, 926, 8621, and 8992) that must be filed as part of each partner’s Form 1040, Individual Income Tax Return.
Even if partnerships do not have foreign income or foreign assets, they may still need to file Schedules K-2 and K-3.
