Category Archives: Partnership and foreign reporting

IRS adds Schedules K-2, K-3 to help report international tax transactions for partnerships

Posted on by • Posted in Canada, foreign multinationals, foreign tax credit, Global Tax, Inbound business, International Tax, Partnership and foreign reporting, Tax, Tax treaty, TCAJ, US tax, Withholding Tax • Tagged • Leave a comment

IR 2020-155

“The Treasury Department and the IRS recently released a proposed redesigned partnership form for tax year 2021 (filing season 2022). The proposed form is designed to provide greater clarity for partners 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 form and instructions provide guidance to partnerships on how to report international tax information to their partners in a standardized format. This proposed form would apply to a partnership required to file Form 1065 only if the partnership has items of international tax relevance (generally foreign activities or foreign partners). The proposed changes would not affect domestic partnerships with no international tax items to report.”

IRS further states:

“Currently, partners are required to report international tax information on their tax returns on several tax forms and schedules. Partners generally obtain the information required to be reported from their partnerships, usually through narrative statements attached to K-1s. Those statements are compiled in a variety of formats and may be difficult for partners to translate onto their own returns. The proposed changes intend to ease this burden through a standard format that offers greater clarity to both partnerships and their partners.

The standard format of the new partnership schedules is designed to better align the information that partnerships provide on the schedules with the tax forms used by partners, allowing partners to more easily prepare their tax returns and the IRS to more efficiently verify taxpayer compliance. It is intended that all the information to be reported on the new schedules is already necessary for the partnership to provide to partners or is available to the partnership.”

IRS and Treasury is currently inviting comments on the Forms. In the mean time let us hope that these Forms will help the taxpayers and professionals and ease the reporting of international tax transactions.