TP received a K-3 but has no foreign income or taxes.

[Love2Cruise]

Does it need to be filed on the individual return? When I attempt to enter Line A on Part 2, United States is not included in the dropdown list.

[Terry53029]

The  schedule K-3 reports a partner’s distributive share of items of international tax relevance and is an extension of the Form 1065 Schedule K-1. If yours is blank you should look at the partnerships instruction if any that came with the K1 or ask the partnership why you received it.

[dascpa]

I'm finding total inconsistencies in the international reporting - blank forms, forms with US only, forms with both US and foreign.  Th end result is that if there is no foreign taxes paid or accrued it does not affect the bottom line of the tax return, only the presentation of the return.  You would need to look at the detail of the K-3 and see what items you might need to report on the tax return including foreign ownership, etc.  They took a simple item and made it 20 pages of ...crap....  Just another reason to retire.

[Love2Cruise]

Hello Terry53029!

Thank you so much for your response. The K-2 is not blank. But all reporting is for United States income only!

The following is stated on the K-3 cover....

"Beginning in the tax year 2021, the Partnership is required to report items of international tax relevance on Schedule K-3. This new schedule provides information for the partners to complete their tax return with respect to the international tax provisions. The Schedule K-3 is provided for all partners; however, only a limited number of unitholders (primarily foreign unitholders, unitholders computing a foreign tax credit on their tax return and certain corporate and/or partnership unitholders) may need the information reported on the Schedule K-3."

Since the section to enter the K-3 information on the K-1 worksheet doesn't have United States listed in the dropdown list, I'm of the mindset that I shouldn't attempt to enter any of the information because I'm unable to record from what country the income is generated.  Your thoughts?

[Love2Cruise]

Amen dascpa! I've gotten far more gray hairs than I need dealing with all of these changes and requirements without CLEAR guidance and understanding. I've researched the IRS website and so many other professional opinions so much that I'm expecting an email from Google telling me to cease because the clear answer is not to be found! I'm most aggravated that in all of their guidance and instructions, the IRS does not address how taxpayers who receive the K-3 and have no foreign income or paid any foreign taxes should handle the K-3. If it doesn't apply to them, just state in on the website that they need not report the information. Simple as that!!! But what do I know? I'm just someone who tries to use the common sense that God gave me.

[sjrcpa]

@Love2Cruise You're forgetting one of the two basic tenets of tax:

It doesn't have to make sense.

It doesn't have to be fair.

[Love2Cruise]

@sjrcpa you are correct. 

But Intuit should have the forms set up correctly in the software so you can enter the information accurately. It's like they're thinking there's no need to include United States in the dropdown list because it's foreign income, which I totally get. That's why I'm baffled that anything on this K-3 has to be reported by my TP. Absolutely all income is US based...which the K-3 states. And because of his  situation, I can't report the information correctly since Proseries worksheet won't allow me to do so. In fact, there is no foreign income or taxes on any of his transactions.

[Terry53029]

@Love2Cruise there is a lot of confusion on this new form. One reason items other than income should be reported on it. as far as what country in the dropdown box, the first line is "not applicable" which I assume to mean only US income, but when you click on it, the box just stays blank which Intuit needs to fix. Maybe @IntuitGabi can look into this for us. Here is a good article from the "Tax Advisor" you may want to read.

https://www.thetaxadviser.com/newsletters/2022/feb/complying-new-schedules-k-2-k-3.html

[Love2Cruise]

@sjrcpa I hope they do as well. Thank you for your input and help. I  have read this article. When I said I've researched every article, I wasn't kidding. I think I've read all of them. 😕

[Love2Cruise]

TP only received the K-1 and K-3 because of his stocks. Ugh!

[IntuitGabi]

Yes, I'll look into this further, thanks Terry. 

[CaptainAl]

Turbo Tax needs to write a letter to the IRS that if schedule K-1 Box 21 is blank then Schedule K-3 is not required.

[sjrcpa]

That box being blank does not necessarily mean K-3 is not required.

And this isn't Turbo Tax.

You’ve come to an Intuit site supporting tax professionals, and you may be looking for support as an individual taxpayer. Please visit the TurboTax Help site for support.

[itonewbie]

I must admit that I'm partial for these new schedules because they do contain information that was technically required for F.1116 but were previously not available. Even if the partnership or S-corp has no foreign partners, no foreign source income, no assets generating foreign-source income, and no foreign taxes paid or accrued, information from column (a) U.S. source would still be needed for the preparation of and computation on F.1116.  Nevertheless, for a majority of the domestic taxpayers who may only have small amounts of foreign-source income and foreign tax from investments/PTE's, this would really be an overkill.

In ProConnect Tax and Lacerte, there is a checkbox for "Compute U.S. source gross income and deduction (if no foreign activity)", which would then prompt the system to prepare K-2 and K-3 without allocation to foreign countries.  Sounds like ProSeries has a similar feature too except it's not currently working.

---

@Love2Cruise wrote:

"Beginning in the tax year 2021, the Partnership is required to report items of international tax relevance on Schedule K-3. This new schedule provides information for the partners to complete their tax return with respect to the international tax provisions. The Schedule K-3 is provided for all partners; however, only a limited number of unitholders (primarily foreign unitholders, unitholders computing a foreign tax credit on their tax return and certain corporate and/or partnership unitholders) may need the information reported on the Schedule K-3."

---

@Terry53029 wrote:

One reason items other than income should be reported on it. as far as what country in the dropdown box, the first line is "not applicable" which I assume to mean only US income, but when you click on it, the box just stays blank which Intuit needs to fix. Maybe @IntuitGabi can look into this for us.

---

[abctax55]

Jensen, Jensen, Jensen......  😂

First, it's an old post (well, five months old, but asking about 2021 returns..)

Second, the most recent post that brought this to the top was from a  *T U R D O   T A X*  individual, not a tax pro.  

So your excellent, well-composed response was likely wasted on that individual.  Tho the rest of us pro's can benefit.

[itonewbie]

Oops, just saw that.  But this is an interesting discussion at least from other tax pros. 😉

[abctax55]

Yes it is, and your posts always are.  Welcome back.

[CaptainAl]

No, it's not Turbo Tax.  I could have said the name of numerous MLPs such as EPD.  Only, the IRS can give us a solution.  I am a CPA and am familiar with the code.

[abctax55]

Turbo Tax needs to write a letter ...

Then why say the above???

[RobinH]

Did you ever find out how to handle reporting  the  information form K-3 (1065)? I have one and there is no foreign income. There is also nowhere to enter it on ProSeries Professional. I'm at a loss

[linduca1216]

ha!