All owners and those in charge of filing partnership and s corporation tax returns:
The issue:
In an effort to catch unreported foreign income, starting with the 2022 income tax return the IRS is requiring all businesses to fill out an additional 15 page form K-2 and K-3 as part of the business tax return reporting foreign income information. The only way to avoid filling out the additional information is to send all owners of the business entity a notice by Jan 15, 2023 stating the business has little or no foreign income and therefore will not be preparing the additional foreign income schedule. For any owners of the business that have over $300 in foreign tax credits on your personal income tax return you will need to notify the business of the need to complete the schedule k-2 and k-3 so you can have all the information needed to prepare your personal tax return. That reply notice (example below) should be returned to the business no later than Feb 15, 2023.
Please mail a copy of this notice to all partners, LLC members or stockholders of your business entity no later than Jan 15, 2022 and keep a record on file with the business tax records to document you sent the notice.
Sample Reply Notice:
For those who need the schedule K-2 and K-3:
I _____________________________(individual name) am a partner/LLC Member or Shareholder in ______________________________(partnership/LLC or S Corp name) and I have foreign income on my personal return that will require me to have the information for the business foreign income. Therefore, I request you complete the form K-2 and K-3 for the income tax return listed.
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