The Internal Revenue Service announced in December that they will begin offering the ability to electronically file the new Schedules K-2 and K-3 for the 2021 tax year. This is a new requirement from the IRS for those who have items of international tax relevance. If you file Form 1065 (U.S. Return of Partnership Income), Form 1120-S (U.S. Income Tax Return for an S Corporation), or Form 8865 (Return of U.S.Persons With Respect to Certain Foreign Partnerships) then you will be required to report the tax information on Schedules K-2 and K3.
The reason for these new schedules is to enforce better tax compliance specifically for large partnerships that conduct business internationally. The goal of these schedules is to provide business owners better insight into determining their US income tax liability for international tax items. If you need assistance in determining if you are required to submit the new Schedules K-2 and K-3, we recommend reviewing the schedule instructions provided by the IRS on their website.
Taxpayers should be aware that the electronic filing capability for Schedules K-2 and K-3 will not be available at the start of the 2022 filing season. The IRS has announced that electronic filing will be available in the following timeframes:
- Form 1065; Available March 20, 2022
- Form 1120-S; Available Mid-June 2022
- Form 8865; Available January 2023
If you are a taxpayer that is required to submit these schedules, please note that if you decide to submit your return prior to when electronic filing becomes available then you should submit the schedules as separate PDF Files attached to your return. If you are not impacted by Schedules K-2 or K-3 then you can move forward with submitting your return electronically at the beginning of 2022 as you will not be affected by the provided timeline.
If you have any questions on these new updates, we recommend contacting your tax professional for more information.
