Schedule K-2 and K-3 Filing Requirements for 2022: IRS Changes Timeline

Domestic filers get reprieve as IRS changes timeline and notice requirement

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The landscape of the 2022 tax season has changed with respect to the Schedule K-2 and K-3 reporting.  Penalties apply if the forms are required but not filed. 

The initial 2022 IRS draft pass-through entity instructions required qualifying entities to send notifications to owners by January 15, but IRS has released (on December 2, 2022) additional changes to the domestic filing exception. 

Overall, the recent changes by IRS seem to be taxpayer-friendly. 

Summary of changes:

  • Elimination of the January 15 notice requirement

The recent revisions to the exception now allow the partnership or S-corporation to give notice to partners/shareholders at any time – “as long as it’s not later than the date the qualifying entity furnishes the Schedule K-1 to the partner/shareholder.”

  • Timeline change

IRS also changed the timeline for partners/shareholders to notify the pass-through entities of their need for information reported on Schedules K-2 and K-3.

This guidance is still a moving target within IRS, and therefore we expect additional guidance to be released over the coming months.  The good news for filers is that the urgency caused by the original January 15 filing date has been removed. 

Pinion advisors will continue monitoring this issue and provide updates around new requirements and their impacts on both the entities and their owners for the coming filing season.

Reach out to a Pinion advisor with questions about new IRS Schedule K-2 or K-3 regulations, or for guidance around notifications and filing.

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