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poncho_mike
Level 3

I have two K-1s with box 16 checked, but only US income. Do I need to go through all of the extra steps, or can I uncheck box 16?

I received a K-1 for Energy Transfer Partners (ET), which is a MLP.   Energy Transfer owns stakes in two other MLPs (USAC & SUN).  The Schedule K-1 shows summary data, but there is a supplemental K-1 information that breaks out how the numbers are distributed across ET, USAC, and Sun.  Also, sun reports data in Box 1 and 2, so I input that as a separate K-1.

 

When I first filed after owning ET, I was told I had to input the data as if I had four K-1s.  One for the main ET, another for USAC, a third for SUN line 1 and a fourth for SUN line 2.  I have done that.

 

This year there is a box 16, which says a K-3 is provided.  I just received the K-3, and it shows there is no foreign income or foreign taxes paid. 

 

So when Box 16 is checked, you have to input a lot of additional data.  I looked at the K-3, and I don't see where the Box 16 data is broken out between USAC, ET, and SUN.  Is all of this additional data input required?  Or can I simply uncheck Box 16?

5 Replies
tagteam
Level 15

I have two K-1s with box 16 checked, but only US income. Do I need to go through all of the extra steps, or can I uncheck box 16?

Mike9241
Level 15

I have two K-1s with box 16 checked, but only US income. Do I need to go through all of the extra steps, or can I uncheck box 16?

i also had ET. you need to complete a K-1 for each entity as reported on the separate schedule.

if you ar enot a foreign unitholder it appears from the  k-3 there is no foreign source income and no foreign taxes paid or accrued. therefore skip the k-3 and uncheck the box on line 16 of the k-1's

from the IRS

  • Schedules K-2 and K-3 are not required to be filed in tax year 2021 if: In tax year 2021, direct partners are not foreign individuals or entities; In tax year 2021, the domestic partnership or S corporation does not engage in foreign activity, does not own foreign assets and has not paid foreign tax;
Chris25
Level 1

I have two K-1s with box 16 checked, but only US income. Do I need to go through all of the extra steps, or can I uncheck box 16?

Thanks for the reply. This makes sense but I am worried as K-3 is sent to IRS it should not come back later that it is not reported on return.

Mike9241
Level 15

I have two K-1s with box 16 checked, but only US income. Do I need to go through all of the extra steps, or can I uncheck box 16?

I have not completed k-3 for any partnerships. most do not have any foreign income and therefore no FTC. I am a US citizen with no foreign assets. if everying on the K-3 is US there is nothing to report for foreign puposes but if you are worried then complete the k-3. 

 

Although the IRS has not offered any specific guidance on ADRs – American Deposit Receipts, as they are foreign stocks whose shares are held by a U.S. bank – ADRs are not assets that must be reported on an 8938. The focus of the assets that must be reported are foreign assets that are beyond the control of an institution with U.S. ties.

 

from my checking, it seems completing form k-3 is a waste of time if there is all the income is US sourced because nothing shows up in the tax return. US income doesn't help in the amount of FTC allowed. 

 

poncho_mike
Level 3

I have two K-1s with box 16 checked, but only US income. Do I need to go through all of the extra steps, or can I uncheck box 16?

@Mike9241

 

I am finding the ET K-1 very confusing, hoping you can shed some light on how to deal with the entries.

 

I entered a negative amount on Code Z (Section 199A information).  I then enter a lot of AH codes on the next page.

 

After stepping through a couple of pages asking about carry-overs (which I assume Turbotax has kept track of), it asks me if there are any QBI carry-overs.  Where would I find that information?

 

The next page states Turbotax sees I have Section 199A income.  I have three choices, 1) this income comes from the partnership that created this K-1, 2) The income comes from another business, and 3) The only source of section 199A income is section 199A dividends, not business income.

 

On the K-1, ET breaks out income for ET, USAC, and SUN.  

 

I broke the entries down into four K-1 entries in Turbotax, one for ET, one for USAC, one for SUN box 1 and one for SUN Box 2.  I'm assuming that for ET, I select the first choice (this income comes from the partnership that created this K-1.   What do I select for the other K-1s?  The income comes from another business?  And would the small amount of Box 2 be coded as 3)?

 

I'm really confused when I get to the point where Turbotax is asking for information on the Seciton 199A income.  It seems like this would be a duplicate of some of the other information I've already entered.

 

Can you offer some general guidance?

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