All of the income, deductions on K3 are U.S. source (i.e. no foreign), the instructions on TurboTax how to enter the information don't match what i have on K3. Advice?

[eavonavi]

I can't seem to find how to enter the U.S. income/deductions from K-3. All of it is US source (no foreign). The instructions on TurboTax don't match the rows/columns i have on the K3 form. How do i complete K3 thru TurboTax?

[DaveF1006]

To clarify, if all the income is US sourced, why was K-3 issued if the income does not have an international tax relevance? Perhaps it was issued mistakenly instead of a K-1.

Please review this IRS FAQ for more information regarding K-2 and K-3  reporting.

[SJW99]

My accountants tell me that partnerships and S-Corp must issue a K3 if the partner is claiming a foreign tax credit on their personal tax return. This applies to the Partnership and the S-Corp even if that entity's income is totally US based. My accountants issued a K3 to everyone because they could not question every partner about their personal return and foreign tax credit. SO, you may get a K3 that you do not use. Just another 10 pages of tax reporting.

[orcus]

I am not a tax professional or lawyer.

I have DBC, the 2022 K-1 references a K-3 is coming, and the "consult your tax professional" notice.  The K-3 is supposed to be delivered by the end of June 2023.  On the 2022 K-1, box 21 (Foreign taxes paid or accrued is blank).

I was curious what was done in 2021.  The 2021 20 page K3 I received had all K3 data reported as US (gain, interest, other income..etc), and the US tied to what exactly was reported on the K-1.  I have no idea why this fund completed a K-3 in 2021 when there was no foreign activity.  Maybe the K-3 is completed to clearly show there's no foreign activity.

Not sure what else to do as you can't really go far in TT with a K-3 with no foreign data.  Based on box 21 being blank on the K-1, I'm going to file 2022 and just ignore the K-3 entirely.  If the 2022 K-3 form comes in reporting foreign income, I may amend.

If the K-3 is all US sourced, and, provided to investors anyways (IE not required), it would be nice if TurboTax investigated proper tax treatment and handled in the interview.  Like maybe the first K-3 question, "Is all data on the K-3 form US sourced? Yes or No", and handled the reporting appropriately.  

[Jasmith63]

No, as many of us are saying, for all of these same questions in support, the LLCs indicate they are required to file the K3 as some partners may have foreign income to report and there is a change on the K3 that includes US as a drop down but TT does not.  Why won’t anyone from TT answer any of these follow up questions since the initial responses are incomplete/inaccurate.  How are filers supposed to move forward when TT is reporting it as an error that can’t be cleared absent unchecking the box 16 which then creates a conflict in information (since there is actually a K3). 

[LindaS5247]

If you do not have any foreign income or foreign tax credits to report on your tax return, and K-3 has not Foreign Income to report you do not have to enter it.  Keep it with your tax records for 2022.

Otherwise, to enter K-3 in TurboTax, 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.

As for what happened in 2021 to change the reporting of Form K-1 (K-2 & K-3):

It is a new requirement. The Legislation was enacted by the IRS in 2021, but not enforced.  In 2021 they did not require the K-3's to be filed.

The new schedules K-2 and K-3 were created to provide consistency in the reporting to partners and shareholders.

According to the IRS's FAQ on the subject (See below):  Prior versions of schedules K and K-1 did not require any specific format to provide international information, resulting in what could be a confusing array of statements attached to the schedules K and K-1.  The new schedules K-2 and K-3 provide greater certainty and consistency, helping partners and shareholders to voluntarily comply with their filing and reporting obligations.  The greater certainty also enables the IRS to verify that partnership and S corporation items are properly reported on partners’ and shareholders’ returns.  This should reduce the burden on both taxpayers and the IRS by reducing unnecessary inquiries and examinations that may arise due to inconsistent reporting of partnership and S corporation items.

Click here for FAQ Schedules K-2 and K-3.

Beginning with tax year 2021, partnerships, S corporations, and filers of Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships (for U.S. persons who are partners in foreign partnerships, or entities electing to be taxed as partnerships), will be required to include the new Schedules K-2, Partners' Distributive Share Items — International, and K-3, Partner's Share of Income, Deductions, Credits, with their returns if they have items of "international tax relevance."   

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]

I do appreciate all of the detail you provided but unfortunately it is still not addressing the question that several of us have raised.  We HAVE gotten the K3 with the K1 and because we have the K3, and box 16 is checked (box 21 empty, BTW), then TT expects the K3 info to be input into the worksheet.  However, on the K3, It is ALL US income/expenses  - that is all that is included on the K3 but US is NOT an available country on the drop down list.  LLCs are saying they were instructed to provide the K3 in case, even with only US transactions, any partner DID need to file a form 1116 (I don’t, I only have $5 in foreign dividends so I can take the credit without filing the form) and needed the verification for this K1. So, just saying you “do not have to enter it” as your first few sentences suggest, creates the conflict that the K3 is attached and  box 16 checked so I can’t just ignore it.  tTT continues to give the error message that because the box 16 is checked, K3 info (all US) must be entered but US is not an option.  But if I uncheck the box (as no foreign transactions) then that means the tax return and the underlying document reported to IRS are inn conflict.  

[LindaS5247]

Yes I understand this conflict.  And I understand everyone's frustration regarding this. I am reporting to you what the tax law says.

If you do not have any foreign income to report on your tax return or tax credits you do not need to enter the K-3.  Keep it for your tax records.   

And this requirement is new this year. I expect all of this will catch up with itself at some point.  If for some reason you were contacted by the IRS regarding your return you have your documentation.

However, if this is not comfortable with you, I suggest you try calling TurboTax Support and connect with a Live Agent who can share your screen.  Click here for information on Turbo Tax Support.

[Dragon_not_fly]

so how do we file our k-3 if it is ALL US income/expenses but US is not an available country on the drop down list?

[DaveF1006]

if this strictly US income, you do not have a K-3 reporting requirement. The reason this was sent to you is if the entity that reported has foreign partners, then they would need to comply with the foreign tax requirements in their countries and report the K-3 information on their foreign returns. In this case, the business entity needs to send the k-3's to every partner, regardless whether or not a specific partner has a reporting requirement. 

@Dragon_not_fly 

[Tygah]

I tried to undo the check mark for Box 16 and ALL the checkboxes for all the lines on the K-1 seem to be frozen ... i.e., they can't be unchecked.  So, I keep getting errors regarding foreign tax info ... when I have none.  Even when I proceed and TT specifically asks is Box 16 is checked, and I answer "No", TT still thinks I'm reporting a K-3.

Suggestions?

[RErbe]

I have the same issue.  The publicly traded partnership has an International investor which requires a K-3 with he K-1.  All of the investments (real property) are in the US, which isn’t an option in Turbo Tax…

The amount is a small loss so if you guys don’t get it fixed I will probably drop the k-3 and amend the return when you get it to work.

thanks!

[jcoley]

leave box 16 checked for the moment and continue past the screen. TT won't allow you to uncheck box 16 because a few screens later your answer to whether your K-1 includes a K-3 was yes.  Continue through to that questions again and answer no this time. Complete the rest of the K-1 questions and then reopen it and you'll find that block 16 has been unchecked.  

[Lorob1]

I have exactly the same predicament as Jasmith63 (numerous U.S. income only K-1s and a small foreign tax credit from other sources).

To complicate the problem, for those of us who actually tried  to port the K-3 information into the TT Schedule K-3 Worksheets is that the TT worksheet does not correspond to the actual K-3, making its completion total guesswork.  Not only can you not enter U.S. in Line A as "Name of Country", but the remaining line items B through AI on the worksheet do not tie to the structure of the actual K-3 (which is divided into many Parts (I through X), with numerous numbered lines.  The Step by Step process does provide  some sketchy guidance but is totally inadequate in resolving the presentation. 

I get that IRS opened the door to this mess which now generates pages and pages of useless information for every partner in an already problematic area (K-1s), but TT needs to shore up its solution.

Thank you,

[JACKALB17]

Re: K-3 US SOURCE SALES

I actually have a comment, not a question, which as everyone could see goes on and on unanswered!!!

TurboTax is selling a product that is full of gaps, missing forms, mistakenly given information and it goes without saying that you expect to get your money's worth and that is NOT GOING TO HAPPEN.  I spent over 2 hours to finally speak to an IRS AGENT, and "YES" A K-3 US SOURCE SALES MUST BE ENTERED AND REPORTED EXACTLY AS IT WAS RECEIVED.