K-2/K-3 Exceptions are Expanded

Reporting K-2/K-3 foreign information can be complicated. The IRS is exempting even more partnerships from having to file these reports.

Photo by Yada Pongsirirushakun on Unsplash

The IRS has required a lot more information beginning a few years ago dealing with foreign transactions and related requirements. This information is reported on Schedule K-2 which is part of the Form 1065 filings and Schedule K-3 which is provided to the partners.

These forms can easily exceed 15 pages each.

The IRS announced last year some exceptions to filing the report. Typically, the exception required no foreign information, and each partner was an individual who was a US citizen, an estate, a domestic grantor or non-grantor trust or a resident alien. However, if the partnership had at least one invalid partner, then Schedule K-2 was required to be filed even if there were no foreign transactions, etc.

The IRS has now expanded the list of partnerships that will not be required to file Schedule K-2/K-3.