IRS Unveils New Draft Schedules K-2, K-3 for Passthrough Entities

By:
Chris Gaetano
Published Date:
May 3, 2021
IRS

The IRS has released drafts of the proposed new Schedules K-2 and K-3 on Forms 1065, 1120-S, and 8865 for tax year 2021 (filing season 2022). The IRS said the schedules are designed to provide greater clarity for partners and shareholders on how to compute their U.S. income tax liability with respect to items of international tax relevance, including claiming deductions and credits. The redesigned forms and instructions will also give useful guidance to partnerships, S corporations and U.S persons who are required to file Form 8865 with respect to controlled foreign partnerships on how to provide international tax information.

The updated forms will apply to any persons required to file Form 1065, 1120-S or 8865, but only if the entity for which the form is being filed has items of international tax relevance (generally foreign activities or foreign partners). The changes do not affect partnerships and S corporations with no items of international tax relevance.

What's been released are just early drafts. The IRS plans to release another draft of the schedules, plus instructions, this summer.

For practitioners who want to learn more about what the IRS has been doing lately, the Foundation for Accounting Eduction is hosting a seminar, the Best Federal Tax Update Course by Surgent Webcast, on June 17, 2021. Register for Webcast here.

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