VIEWpoint Issue 2 | 2022
Inflation Reduction Act: Highlights of Key Changes for You and Yo...
2022-2023 Tax Planning Guide
The Internal Revenue Service (IRS) recently shared new FAQs outlining the scope of filing relief for domestic entities that must follow new international reporting requirements. The FAQs come after the IRS’ Feb. 15 announcement stating it will provide transition relief for Schedules K-2 and K-3 after feedback from tax filers. Many filers expressed their confusion and frustration with the updated instructions on Schedules K-2 and K-3 for individuals filing these forms:
These new schedules took effect for tax year 2021 and apply to pass-through entities, its partners and shareholders with “items of international tax relevance.” Partnerships and S corporations must report each partner’s and shareholder’s total distributive share of international items on Schedule K-2, as well as report their respective allocative shares of these items on Schedule K-3.
Prior to the FAQs, many filers and tax advisors believed the Schedules would only need to be filed if a partnership or S corporation had foreign operations or foreign equity holders. However, the updated instructions point out that entities without foreign activities or equity holders would still need to complete portions of Schedules K-2 and K-3 if a partner or shareholder claimed a foreign tax credit and required information from the entity to complete Form 1116, Foreign Tax Credit.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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