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How to enter K-1 foreign taxes on a 1040 in ProConnect

by Intuit Updated 2 years ago

Starting in tax year 2021 the IRS updated the Schedule K-1 to include a new Schedule K-3 to report the partner's share of international transactions. This replaces and adds more detail to the codes that appeared on 1065 Schedule K-1, line 16 in prior years.

This article will help you:

  • Enter info from the K-3, parts II and III, on an individual return;
  • Generate the foreign tax credit Form 1116; and
  • Understand where items from other parts of the Schedule K-3 may need to be reported.

You may be able to use the information reported on Sch. K-3 to figure your foreign tax credit. For more information, see Form 1116, Foreign Tax Credit and IRS Pub. 514 for Individuals. 

To enter K-3 parts II and III:

  1. From Income, under Passthrough K-1's, go to Partnership Info (1065) or S-Corp Info (1120S), depending on the K-1 type.
  2. From along the top of the workspace, select the following for your K-1 type:
    • Partnership: Lines 11-20
    • S Corporation: Lines 11-17
  3. Scroll down to the section for your K-1 type:
    • Partnership: Line 16 - International Tax (Schedule K-3 - Form 1065)
    • S Corporation: Line 14 - International Tax (Schedule K-3 - Form 1120-S)
  4. Enter the following info for each country where foreign taxes were paid or accrued:
    1. Form 1116 Name - leave this field blank unless you want to link the entry to an existing form.
    2. Name of Country must be selected for any line you're not linking to an existing Form 1116.
    3. Select the Category of Foreign Income (if not linking to an existing 1116).
    4. Enter the Partner's foreign gross income for this category.
    5. Enter any Interest Expense Allocated to Foreign Sources from Part III, section 2.
    6. Enter any Other Foreign Deductions Apportioned or Allocated from Part III.
    7. Enter the amount of Foreign Tax Withheld (US Dollars) from Part III, section 4.
    8. Enter the amount of Foreign Tax Withheld (Foreign Currency) if applicable.
    9. Enter the Date Paid or Accrued.
    10. Select the Type of Income Withheld On.
  5. Repeat these steps for any other countries.

Where do I enter the K-3 gross income from all sources?

To have the Schedule K-3 gross income from all sources affect the calculation of Form 1116, line 3e, follow these steps:

  1. From Credits, under Foreign Tax Credit (1116), go to Foreign Tax Credit (1116).
  2. Select the tab for the desired foreign country, from there selecting the Gen Info./Elections option in the upper-right corner of the workspace.
  3. Enter the amount in Gross income from all sources [Adjust].

Where do I enter other parts of the K-3?

Schedule K-3 parts IV - XII aren't used to calculate the foreign tax credit, but provide information you may need for other forms in the return. See the Schedule K-3 instructions for additional information.

  1. Go to the Input Return tab.
  2. On the left-side menu, select Income.
  3. Click on Partnership Info (1065 K-1).
  4. On the left-side menu, select Line 16 - Foreign Transactions.
  5. Click inside of the Foreign tax withheld (foreign currency) (Click on button to expand) field.
  6. Click the plus sign (+) that appears to expand the input field.
  7. Enter the amounts and information as provided by the partnership*:
    • Name of foreign country
    • Category of foreign income
    • Partner's foreign gross income
    • Interest expenses allocated to foreign sources
    • Other foreign deductions
    • Foreign tax withheld (US dollars)
    • Date paid or accrued
    • Type of income withheld on
  8. Click OK to return to the main input screen.

*Click on an item below to learn more about how the program handles each entry.

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