IRS Releases New Proposed Partnership Schedules (K-2 and K-3) for International Tax Reporting

If you’re a U.S. partnership with international items of relevance (i.e., foreign partners or foreign activities), you will likely be required to file new Schedules K-2 and K-3 for 2021 tax year (2022 filing season), along with Schedule K-1.

The new forms are extensive (K-2 is 20 pages and K-3 is 23 pages long) and are designed to supplement and clarify the former Form 1065 international information and provide partnerships a “standardized format” for reporting international tax information.

Domestic partnerships with no international tax items to report would not be affected by the proposed changes.

Currently, partnerships report foreign tax information in Box 16 of Part III in Schedule K-1, as well as Box 20 “other information” by attaching narrative statements to K-1s. These statements are presented in a variety of formats, which make it difficult for partners to correctly interpret and report on their own tax returns. The new proposed schedules are designed to streamline this process by better aligning the information provided by partnership with the tax forms partners use. The new draft Schedule K-2 (Form 1065), Partners’ Distributive Share Items – International would replace portions of Schedule K-1, Part III, lines 16(a) through 16(r) and Schedule K-3 (Form 1065), Partner’s – Share of Income, Deductions, Credits, etc. – International would replace portions of Schedule K-1, Part III, Boxes 16 and 20.  Draft formats are available through the IRS website.

Public commenting for new schedules ended on Sept 14, 2020. The IRS is expected to release final forms later this year. Overall, the new designed schedules will create additional complexities and increased tax compliance to applicable partnerships, as the draft schedules do not replace existing reporting requirements but are intended to provide more detailed information to their partners.

For more information about this topic, including reporting requirements for all entities with international activities, please contact your Schneider Downs international tax advisor.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2020 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on

Selling Your Business to the Next Generation While Deferring Tax Liability and Supporting a Favorite Charity
International Trade Deal Creates the World’s Largest Trading Bloc
PA Unemployment Compensation Benefits Charges Update
Tax BY Kirk Mitchell
Preliminary Observations on Tax Implications of 2020 Elections
Projected Estate and Gift Tax Changes Announced by the IRS for 2021
EU Provides Guidance on the New E-Commerce VAT Rules

Register to receive our weekly newsletter with our most recent columns and insights.

Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us

contact us

Map of Pittsburgh Office
Pittsburgh

One PPG Place, Suite 1700
Pittsburgh, PA 15222

contactsd@schneiderdowns.com
p:412.261.3644     f:412.261.4876

Map of Columbus Office
Columbus

65 East State Street, Suite 2000
Columbus, OH 43215

contactsd@schneiderdowns.com
p:614.621.4060     f:614.621.4062

Map of Washington Office
Washington, D.C.

1660 International Drive, Suite 600
McLean, VA 22102