Schedule K-2 and K-3 Information
What are Schedules K-2 and K-3?
Schedule K-2 is the IRS form that partnerships need to file with their club's Form 1065 tax return if the partnership has certain foreign income, foreign partners or foreign activities.
Schedule K-3 is the corresponding IRS form that partnerships generate and give to partners. The individual partners use the Schedule K-3 when they prepare their personal income tax returns.
The IRS started requiring the Schedule K-2 and Schedule K-3 forms for the 2021 tax year. Bivio generated the Schedule K-2 and Schedule K-3 forms with your 2021 investment club tax documents.
What is new for the 2022 Tax Year?
The IRS now offers a way for many investment clubs to eliminate or reduce Schedule K-2 and K-3 from your 2022 club tax filing. It is called the Domestic Filing Exception. It will save your club time and paper. Some clubs will NOT qualify for the exception and will still need to generate and file forms K-2 and K-3.
Domestic Filing Exception Criteria Summary:
If your club meets these criteria, then the club meets the Domestic Filing Exception. This means:
If you use bivio software to complete your club taxes, your answers in the bivio tax interview will determine if your club meets the Domestic Filing Exception. bivio's software will generate the proper notification to partners as an attachment to each partner's K-1.
More questions? Email club specific questions to: firstname.lastname@example.org