In mid-July, the Treasury Department and the IRS released a proposed redesigned partnership form for tax year 2021 (for the 2022 filing season). The goal of the proposed form is to clarify for partners how they compute U.S. income tax liability for items related to international tax.
The redesigned form and instructions provide guidance to partnerships on how to report international tax information to their partners in a standardized format. Currently, partners are required to report international tax information on their returns on several tax forms and schedules. Partners generally obtain the information required for reporting from their partnerships, usually through footnotes attached to K-1s.
The proposed parts included in new Form 1065, Schedule K-2 replace portions of existing Form 1065, Schedule K, lines 16(a) through 16(r), and the new Form 1065, Schedule K-3 replaces portions of Schedule K-1, Part III, Boxes 16 and 20. Additionally, Schedule K-3 provides information to the partner in the same general format that might be completed by the partner on the following forms:
Schedule K-2 will be attached to a partnership’s Form 1065 and filed by the due date (including extensions) for that return. Schedule K-3 will be provided to the partners in according to the timeline for providing the Schedule K-1.
The Treasury Department and the IRS released the draft returns early to afford time for stakeholder input and engagement. The Treasury and IRS welcome comments from affected stakeholders through Sept. 14, 2020, and written comments should be sent to the following email address: [email protected] with the subject line “International Form Changes.”
In addition, both agencies are planning a series of listening events to take comments and answer questions about the proposed form. More details about participating in these events will be posted by the IRS as soon as they are finalized.
Please reach out to your Baker Tilly international tax advisor to discuss how these changes may affect your tax situation.
For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.