As a result of the Tax Cuts and Jobs Act of 2017 (TCJA), the IRS introduced two new schedules (Schedules K-2 and K-3) that may need to be completed for partnerships and S Corporations for the 2021 tax year. The purpose of the schedules are to report items of international tax relevance when calculating a shareholder’s U.S. tax liabilities. For several reasons, these new schedules are causing filing and processing delays. The AICPA alongside the tax practitioner community pushed back on the IRS with requests for clarification on filing requirements.
On February 16, 2022, the IRS updated guidance which provided some relief, but left uncertainties on the obligation to file for domestic entities with 100% U.S. sourced gross income. Our firm has taken the position to file extensions for many of the flow-through entities we file in the event these schedules are required. Please bear with us as we navigate through this transition.
For additional information, you can view the FAQs on the IRS website or contact us at 804-249-5786.