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The IRS announced on Friday that it will be rolling out the ability to electronically file the new Schedules K-2 and K-3 next year, but not at the beginning of the filing season. Schedules K-2 (Partners’ Distributive Share Items — International) and K-3 (Partner’s Share of Income, Deductions, Credits, etc. — International) are new for the 2021 tax year. If taxpayers have items of international tax that are relevant, they’re required to report the information 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) or Form 8865 (Return of U.S. Persons With Respect to Certain Foreign Partnerships). They are part of the IRS’s efforts to require better tax compliance, especially for large partnerships that do business internationally. The schedules are supposed to give partners and shareholders more clarity about how to figure their U.S. income tax liability when it comes to international tax items, including claiming deductions and credits.
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