BDO USA has published an article, “New Reporting Requirements for 2021 Partnership and S Corporation Returns”, published on BDO USA. The abstract is as follows:
Beginning with the 2021 tax year, certain partnerships and S corporations must use Schedules K-2 and K-3 to report items of international tax relevance to their partners and shareholders. Generally, Schedules K-2 and K-3 replace reporting that was previously done on Box 16 of Schedule K and K-1 and streamline reporting of certain items that historically would have been represented on footnotes or attachments to Schedule K-1.
Based on initial IRS guidance, partnerships and S corporations that had “items of international tax relevance (typically, international activities or foreign partners)” would be required to file the Schedules K-2 and K-3. The Schedules K-2 and K-3 are divided into multiple “Parts,” each of which have their own filing instructions and guidance on how to determine whether that particular “Part” is relevant or required to be completed. Generally, in most cases, the presumptions in the IRS guidance favors filing the schedules where there is any uncertainty, e.g., when the identity or status of certain direct or indirect partners cannot be determined.
Posted by Marin Larkin, Associate Editor, Wealth Strategies Journal.