Can a K3 be ignored if the K1 box 21 (foreign taxes) is blank?

[Lone Mountain]

I have received my K1, and for the first time, a K3. It seems that the K3 can be ignored if the K1 shows no foreign taxes being paid or accrued (K1, box 21 is blank).  So, can I just uncheck the K3 box in TurboTax and proceed with the K1? Thanks!

[MaryK4]

Yes if there is no reportable information you can uncheck the K3 box so that you can file your tax return.

[Jasmith63]

but MaryK4 why won’t TT explicitly say this/fix this instead of making us come to the comments to find it buried in a reply.  many of us have wasted day/weeks (and some, money, to consult an independent tax professional after paying for TT).. 

[LindaS5247]

If you have no other foreign income or foreign tax credits to report on your return you do not have to include the K-3. Keep it with your tax records.

Otherwise, you will have to enter your Form K-3.

To enter, switch to "Forms Mode", Type "K-3" in the box (top left).  You will see this:

Click "Next" and you will see this:

Click "Finish" and you will see this:

Depending which version of TurboTax you have you can also try this to enter the K-3:

1. Open the Schedule K-1 Worksheet.
2. Scroll down to the Foreign Transactions line: For partners, this is line 16. For shareholders, this is line 14.
3. Check the Schedule K-3 is attached if checked box.
4. Enter the Name of Country or U.S. Possession.
5. Complete lines B through AI based on the K-3 received.

If this does not help please feel free to come back to TurboTax Community with additional questions or click here for information on Turbo Tax Support.  You can connect with a Live TurboTax Agent and share your screen.

[Jasmith63]

as mentioned in the other thread, all the transactions on the K3 are US but US is not an option from the drop down so the K3 info can’t be entered. 

[LindaS5247]

If you have no other foreign income or foreign tax credits to report on your tax return you do not have to include the K-3. Keep it with your tax records.

Otherwise, to enter your K-3, switch to "Forms Mode", Type "K-3" in the box (top left).  You will see this:

Click "Next" and you will see this:

Click "Finish" and you will see this:

Depending which version of TurboTax you have you can also try this to enter the K-3:

1. Open the Schedule K-1 Worksheet.
2. Scroll down to the Foreign Transactions line: For partners, this is line 16. For shareholders, this is line 14.
3. Check the Schedule K-3 is attached if checked box.
4. Enter the Name of Country or U.S. Possession.
5. Complete lines B through AI based on the K-3 received.

If this does not help please feel free to come back to TurboTax Community with additional questions or click here for information on Turbo Tax Support.  You can connect with a Live TurboTax Agent and share your screen.

[Jasmith63]

also just adding that I searched the TT community and on the exact same day last year - march 28, 2022 - these same questions are raised by TT users - with the same issue that the TT form is not EXACTLY like the IRS form and seems to continue to create this conflict.  if the info in Part 2 is all i column a US transactions, TT should recognize that an LLc may need to file the K3 and check box 16 but the taxpayer may not have any K3 foreign income to input.  so either add US in the drop down, or stop creating the error message that prevents users from moving forward.  telling us to just not fill it out if there is no foreign income is telling us to ignore what is in the K1 just because TT hasn’t fixed it in its system. 

[Jasmith63]

you have now sent this same response to me 3 times.  exact same so it feels like a bot and is not answering the question. 

[LindaS5247]

Last year, for 2021, the IRS did not require K-3's to be reported as it was a new requirement, and they granted relief for 2021 only, in guidance provided January 18, 2022 for the 2021 tax year only. This was done after filing season started, so it created a lot of confusion for last years tax returns and that is what you are seeing in the 2022 posts in Community. 

"The instructions and the January 18, 2022 updates provide certain exceptions to completing Schedules K-2 and K-3.  For example:

As stated in the instructions, the partnership need not complete Schedules K-2 and K-3, Parts II and III if it knows that it has no direct or indirect partners eligible to claim a foreign tax credit.  A similar exception applies with respect to S corporations."  This applied to 2021 only.

What my post said was that "if you do not have any foreign income or foreign tax credits to report on your tax return" you do not need to include Schedule K-3.  This is one of the IRS exceptions.  

If there is no reportable information, you can uncheck the K3 box so that you can file your tax return.

The Form K-3 was developed for the purposes of international reporting requirements which used to be part of a K-1. So, if you don't have anything of an international nature to report, just leave it alone. See HERE   #2 for more detail.

 

I also suggested that you "contact TurboTax Support for additional help".  They have the ability to share your screen and help guide you through the entries.  We do not have that ability here in Community.

"If this does not help please feel free to come back to TurboTax Community with additional questions or click here for information on Turbo Tax Support.  You can connect with a Live TurboTax Agent and share your screen."

[BH3333]

@MaryK4 

I certainly agree. I have spent a lot of time on this issue and this is EXACTLY the sort of thing that we pay TT to save us time and worry about.

Please add this to the tool!!!

[jaawyo]

I am a long-time TT-Premier user and have received several K1s all with Box 16 checked and reporting Foreign Taxes paid or accrued in Box 21.  Each of the accompanying K3s show activity for the US and then other countries.  Based on the instruction in TT-Premier, I am creating a unique K1 for each foreign country, but am not reporting the K3 detail shown for the US activity.

Unfortunately, I am receiving all sorts of purported errors related to the entries for these K1s during TT’s "Smart Check" process and am unable to determine how to correct them.  I had this same problem in completing my 2021 return and was never able to resolve/correct these Smart Check errors.

So does TT-Premier require that activity attributed to/reported as US be entered?

[BrittanyS]

The K-3 is used to report foreign income.  If you know you will not receive foreign income or do not feel the K-3 applies to you then you can uncheck box 16.  However, if you receive a K-3 at a later date with foreign income you will need to amend your return to include the income.  If you will be receiving the K-3 with foreign income, you should file for an extension and file the return once the K-3 is received.  Keep in mind that an extension gives additional time to file but not to pay your taxes.  If you know a balance will be due, you will need to make an estimated payment to cover the tax to avoid any penalties for not pre-paying tax.

@jaawyo 

[AndyPost]

I SO agree with your POV.  I endlessly circled back to the worksheet support pointed to thinking I could just enter the data from the  K-3 directly to turbo tax.  I was relieved to find the K-3 section when viewing forms directly and thought I could enter some version of reality there, only to find I can't even enter data in the foreign transactions worksheet row B nor can I over ride it.  GEEZ!  But I CAN ignore the whole mess.  Would-a-been good to know.  

[jaawyo]

Thanks for the follow-up Brittany, but your response fails to address my question which relates to both compliance and TT-Premier software.  Specifically, if a K1 shows "Foreign taxes paid or accrued" in Box 21 and the K3 has a line showing "US" activity, along with activities in other countries, does the US activity need to be included/detailed/entered in the tax return and in order to address errors TT-Premier generated for the K3?

Put another way, I have followed the step-by-step instruction in TT-Premier for entering foreign activities detailed in a K3, but not those attributed to "US", and am receiving errors in TT-Premier's final error check related to the K3.

Please help.

[RobertB4444]

The US activity should not have been reported on the K-3.  That's happening a lot as firms still don't understand how to use it.  You can definitely leave any US activity off of the K3.

@jaawyo