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A diagnostic has been added to the Partnership and S Corporation alerting preparers to the change in filing scope, and linking them to the revised instructions. At this time, these revisions aren't contained in the current K2 / K3 printed instructions. They can only be found on the IRS website.
Based on the design of the form, the K-2 input is divided into two sections:
These two sections function differently, and so will special allocations, so let’s take them one by one.
Section 1, International: In the program, these are seen as “non-prefixed” entries. In other words, you won’t be creating an “activity 1”, “activity 2” and so on (like you would for rental properties, for instance). Input in this section can be allocated to partners/shareholders in the next input section: Partner Overrides-Int’l (Sch K-3). As with any allocation, the entire amount should be allocated, and a “-1” entry made for partners or shareholder who shouldn't receive any allocation of a specific item.
Section 2, Parts II & III Foreign Tax Credit Limitation and Foreign Tax: In the program, these are seen as “prefixed” entries. In other words, you can create an “activity 1”, “activity 2” and so on (like you would for rental properties for instance). In this section, you'll see a section box on the top of the screen for each “Country”.
Each of these separate “activities” can be specially allocated using the second input line on each: Partner overrides: (-1 = none) (O) (Click on button to expand).
This response does not address the issue of having the ability to auto populate the sales, etc. info when there is NO FOREIGN ACTIVITY, and the form is only being completed for any shareholders that might have an 1116 foreign tax credit filing requirement on their 1040.
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