Filing the K-2 and K-3 with 1065/1120-S

k-2 k-3 reporting Tatiana Loughman

Form 1116, Claim the Foreign Tax Credit

Per IRS link https://www.irs.gov/instructions/i1116 ,
no requirement to file Form 1116 if all prerequisites are met:

-(1) Your foreign source gross income was all passive income, such as interest and dividends.

-(2) All income was reported to you on Schedule K-1, Schedule K-3 (Form 1065), Schedule K-3 (Form 1120-S), Form 1099-DIV, Form 1099-INT or similar substitute statements are qualified payee statements.

-(3) Your total creditable foreign taxes don’t exceed $300 ($600 if married).

Exception from filing the K-2 and K-3 can be elected via this sample text:

IN TAX YEAR 2021, THE S CORP HAS NO FOREIGN ACTIVITY, INCLUDING FOREIGN TAXES PAID OR ACCRUED OR OWNERSHIP OF ASSETS THAT GENERATE, HAVE GENERATED OR MAY REASONABLY EXPECTED TO GENERATE FOREIGN SOURCE INCOME.S CORP HAS NO KNOWLEDGE THAT THE SHAREHLDRS ARE REQUESTING SUCH INFORMATION FOR TAX YEAR 2021. IN 2021,SHARHLDRS ARE NOT FOREIGN PARTNERSHIPS, FOREIGN CORPORATIONS, FOREIGN INDIVIDUALS, FOREIGN ESTATES OR FOREIGN TRUSTS. IN 2020 S CORP DIDN’T PROVIDE TO SHAREHLDRS LINE 17D OR LINE 14(K1).

Filing K-2 and K-3 is a requirement, not an option. It does, however, include exceptions from filing, which need to be well documented and disclosed on the return.

K-2 K-3
Business Partnership S-Corp

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