Access resources to advise clients on IRS Schedules K-2 and K-3, which are used to report items of international tax relevance from the operations of pass-through entities.
If a taxpayer has items of international relevance, they are required to report on Schedules K-2 and K-3 if they file:
Form 1065, U.S. Return of Partnership Income
Form 1120-S, U.S. Income Tax Return for an S Corporation
Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships
Schedules K-2 and K-3 replace, supplement and clarify the reporting of certain amounts formerly reported on a partner’s or shareholder’s Schedule K-1 as foreign transactions.
Notify your clients about the new reporting forms and advise them to contact you with questions.
Further updates to the instructions for 2022 Schedules K-2 and K-3 have provided exemptions for filing as well as other clarifications important for tax practitioners.
Schedules K-2 and K-3 aim to standardize international tax information reporting to flow-through investors, yet challenges in practical implementation exist.
Listen to this podcast covering the new schedules and related past and future AICPA efforts.
In this Journal of Accountancy podcast, learn how to better understand the ins and outs of these formidable forms.
Domestic filing exception requirements modified in draft Scheds. K-2, K-3, The Tax Adviser, December 9, 2022
Schedules K-2 and K-3 e-file capability postponed for S corporations, The Tax Adviser, April 28, 2022
More Schedule K-2 and K-3 FAQs posted, The Tax Adviser, April 13, 2022
IRS offers further K-2/K-3 relief, The Tax Adviser, Feb. 16, 2022
Complying with new schedules K-2 and K-3, Tax Insider, Feb. 11, 2022
See more articles from The Tax Adviser on Schedules K-2 and K-3.
Comments on Schedule K-2 and Schedule K-3 2022 draft instructions, Nov. 30, 2022
Concerns regarding Schedules K-2 and K-3 reporting, Feb. 24, 2022
Additional comments regarding Schedules K-2 and K-3, Feb. 18, 2022
Comments on proposed international changes to Form 1065, Schedules K-2 and K-3, Sept. 14, 2020
IRS guidance
FAQs
This set of FAQs provides answers to common questions, such as who is required to file the schedules and what transition relief is available.
This IRS FAQs page answers questions related to schedule attachments for short-year returns.
Forms
Schedule K-2 (Form 1065), Partners’ Distributive Share Items — International and Instructions
Schedule K-2 is an extension of Schedule K of Form 1065 and is used to report items of international tax relevance from the operation of a partnership.
Schedule K-3 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc.— International and Instructions
Schedule K-3 reports items of international tax relevance from the operation of a partnership.
Schedule K-2 (1120-S), Shareholders’ Pro Rata Share Items — International and Instructions
Schedule K-2 is an extension of Form 1120-S, Schedule K, and is used to report items of international tax relevance from the operation of an S corporation.
Schedule K-3 (Form 1120-S), Shareholders’ Share of Income, Deductions, Credits, etc. — International and Instructions
Schedule K-3 is an extension of Schedule K-1 (Form 1120-S) and is generally used to report to shareholders their share of the items reported on Schedule K-2.
Notices
Notice 2021-39
This notice provides background information on Schedules K-2 and K-3 as well as information on potential penalties for noncompliance. The notice also covers transition relief from penalties for incorrect or incomplete information if the filer establishes that they made a good faith effort to comply with the new reporting requirements.
Other IRS guidance
Post-Release Changes to Tax Forms, Instructions and Publications
The articles on this page explain specific changes to forms, instructions or publications after they are available on IRS.gov.
Schedules K-2 and K-3: Interim Electronic Filing for Tax Year 2021
This IRS guidance page provides details on how to submit the schedules with an electronic return and the timeframe of availability for the Modernized e-File (MeF) system.
This resource is part of the robust tax resource library available from the AICPA Tax Section. The Tax Section is your go-to home base for staying up to date on the latest tax developments and providing the edge you need for upskilling your professional development. If you’re not already a member, consider joining this prestigious community of your tax peers. You’ll get free CPE, access to rich technical content such as our Annual Tax Compliance Kit, a weekly member newsletter and a digital subscription to The Tax Adviser.
