We are pleased to partner with the Connecticut Society of CPAs to offer this event. CTCPA will be hosting this program on their Zoom platform, you will receive a Zoom registration link in your email confirmation.
On January 18, the IRS posted updates to the instructions for the new Schedules K-2 and K-3 for partnerships and S corporations that pointed out that most entities with no international activities or foreign equity holders will need to provide information via these Schedules unless they obtain information from each equity holder. To make matters worse, the IRS is indicating that it will not be ready to accept these forms electronically until after the original due dates for these returns, with the S corporation version not expected to be available until June.
In this session, we’ll look at the conditions under which these Schedules must be prepared by partnerships and S corporations, as well as steps that can be taken to obtain information from equity holders that may allow the entities to avoid the preparation of the forms.
- Prepare Schedules K-2 and Schedules K-3 for 2021 partnership income tax returns
- Use information from Schedule K-3 included with a partners’ K-1 to prepare the individual return
- Recognize situations where the penalty relief for 2021 can be applied, as well as understand penalties the IRS claims it can assert if the form is not properly completed
- Advise clients regarding the comprehensive partnership audit regime and recognize those that may opt out.
- List the dates the IRS expects to allow full MeF/XML filing for Schedules K-2 and K-3 for various entity types
- Advise clients on the use of the interim period option to attach PDFs
- Identity partnerships and S corporation data needed by clients to prepare international tax information
- Understand what data must be obtained from partners/shareholders for a partnership or S corporation to potentially not be required to file Schedules K-2 and K-3
- Be able to use the decision worksheet provided to assist in advising clients whether Schedules K-2 and K-3 should be completed as part of a Form 1065 or 1120S 2021 income tax return.
- The IRS project that lead to the requirement to prepare and file Schedules K-2 and K-3, from its origins in 2020 to finalization in 2021
- The original instructions and why the sentence many entities believed meant they didn’t have to file this form turned out not to mean what the entities thought it did.
- Determining if your entity is required to file these returns and the possible steps that could be taken to avoid this requirement (as well as why the cure may be worse than the disease in many cases)
- The option to claim the foreign tax credit without filing Form 1116 in certain cases that, if used by all equity holders of the entity, may allow the partnership to skip the preparation of these schedules.
Maryland Association of CPAs
Professional Area of Focus
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Schedules K-2 & K-3: Why Even Partnerships and S Corporations with No Foreign Activities or Members May Need to Prepare These Forms