Have you seen the newly redesigned partnership tax form? The IRS would like taxpayer input on it before releasing it in 2021. According to the IRS, the proposed form is designed to provide greater clarity for partners on how to compute their U.S. income tax liability with respect to items of international tax relevance, including claiming deductions and credits.
“The redesigned form and instructions provide guidance to partnerships on how to report international tax information to their partners in a standardized format,” the IRS states. “This proposed form would apply to a partnership required to file Form 1065 only if the partnership has items of international tax relevance (generally foreign activities or foreign partners). The proposed changes would not affect domestic partnerships with no international tax items to report.”
Affected taxpayers have until September 14, 2020, to offer input on the new designs for both Schedule K-2 and Schedule K-3, which can be accessed here. Written comments should be emailed to lbi.passthrough.international.form.changes@irs.gov with the subject line: “International Form Changes.”
The proposed Form 1065 changes come on the heels of a 2020 tax-year change requiring partnerships to report capital accounts on the tax basis method without the use of the transactional approach and also report specific partner at-risk information. That move came under fire by several organizations, including the American Bar Association.
Before filing Form 1065 for the current tax year or next, discuss the changes with your CPA and how they may affect the way you report partnership tax information. Feel free to contact us with questions.