How could I skip the critical diagnosis for Schedule K-3 for foreign partners without a SSN or ITIN?

[ana-barbara]

Last year, we didn't need the SSN or ITIN for our foreign partners for reporting Schedule K-3. This year this is a critical diagnosis. How could we solve it?

[ProActive Bookkeeping Consultant · Accepted solution]

I received the same and couldn't used "Applied For" either.  I saw a post on the ProConnect Tax Online facebook page and the person spoke with a representative from PTO stating we had to paper file.  So, that is what I did yesterday for 50+ pages.

[itonewbie]

ITIN has been a requirement for foreign partners who are subject to reporting and withholding requirements.  And the IRS is just tightening up the validation check for consistency now.

Intuit's previous advice for choosing "Applied For" to circumvent the system was misplaced because that option should really not be chosen unless an application for ITIN was, indeed, in process.

Why would the foreign partner not apply for an ITIN?  Is there no income at all, ECI or FDAP, flowing through from the partnership?

[ana-barbara]

Thanks for your reply! 

In this case, yes, there is no ECI or FDAP. This is a final return for a partnership with 12 foreign partners, the only record is $150 from bank fees. So I am assuming we will have to paper file this time.

Thanks!

[ana-barbara]

Thank you! You reminded me to join the FB group and I will follow your advice to paper file.

[itonewbie]

Think that's what you'd need to do.

[ProActive Bookkeeping Consultant]

The foreign partners are corporations in Spain.  They do have income and ECTI that requires the Forms 8804/8805, but they don't care about filing for the withholding credit.  I did inform them an EIN may need to be applied for after all but I need to research it more.

[itonewbie]

So, these foreign partners had US tax withheld and income reported.  They have US ECI and would be required to file a US tax return.  Without an ITIN, they can't claim a credit for the withholding (which supposedly goes into a pool) and would have a balance due on the US return.  At the same time, they will presumably have to report that same US-source income on their home country tax return.  Without documentary proof of their US tax payment, they would then be subject to double tax in their home country.  All because they don't bother to apply for an ITIN?

Something doesn't quite add up...