2022 K-1 box 16

[LoneJohnny5]

Doing 2022 taxes. Several K-1 forms have box 16 checked. TTax requires Schedule K-3 to be entered when that's the case. However, those won't be available until sometime in August. Does this mean I have to file an extension and wait for them? Or can I just not check the box, and file an amended later if entering them changes my taxes? 

[Mike9241 · Accepted solution]

unless you are a nonresident alien, usually only the foreign tax info on the k-3 will affect you.  column A can be ignored unless you are A NRA but then you would be filing form 1040-NR which Turbotax does do.

here's what 1 letter accompanying a 2022 k-1 stated.

Beginning in tax year 2021, the Partnership will report items of international tax relevance to our partners on new Schedule K-3. As we disclose in our quarterly distribution press releases, all of our income is effectively connected with a United States trade or business. However, 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 detailed information disclosed on Schedule K-3 for their specific reporting requirements. if line 21 is blank there is no foreign tax credit so unless you meet one of the other requirements there will be nothing to report 

your choice - wait 

or file and if needed amend

[AliciaP1 · Accepted solution]

Entry for the Schedule K-3 on your federal tax return is ready to go in TurboTax.  You may be seeing a delay of processing for your state and if that is the case you can see Forms availability table for TurboTax individual (personal) tax products for updates.

Within your tax return use the magnifying glass to search k-1 and use the Jump to link in the search results.  Enter the type of K-1 it is and when you mark box 16 it will walk you through entering the K-3s.

You will need to create a new K-1 for each country only if there is more than one type of foreign gross income in columns (b), (c), (d), and/or (e) of the K-3.  If you only have information in 1 column for 3 countries you can list the Foreign Country or U.S. Possession dropdown box as Various.  Then add the amounts for the different countries and enter them as one amount in the appropriate column.  If your K-3 does list amounts in more than one of the columns (b - e), you will need to enter a separate K-1 worksheet for each column.  You can still add the countries together and show the Foreign Country as Various for amounts in the same column.

For example:

Schedule K-3 Line 1 has $5,000 in column b (France) 

Schedule K-3 Line 2 has $2,000 in column b (Germany)

Schedule K-3 Line 3 has $12,000 in column c (France)

                       You will have 2 Schedule K-1s entered into TurboTax to accommodate the different types of foreign income (columns b & c).  One will have the Foreign Country or U.S. Possession dropdown as Various and Foreign branch category income (Column B) box will be $7,000. Then finish entering the K-1 with all the other box information included.

                       Enter a new K-1 with the same company information but no amounts in any box except box 16.  This will have the Foreign Country or U.S. Possession dropdown as France and the Foreign gross income (Column C) box will be $12,000.  Finish entering the K-1 with the remaining information being blank (or No).

@LoneJohnny5 

[tspazok1]

Foreign Country or U.S. Possession dropdown box NOT APPLICABLE? Given there is no drop down menu for US could this be a cause of me getting errors on my tax review on my K1's?  This is copied from the K3 PDF filing form (If income is U.S. source, enter “US.” Do not enter “various” or
“OC” for the country code. )

Given the latest ruling for the IRS there is no need to file a K3 so can you just say no to Check mark on line 16?

Limited exception to filing January 11, 2023

New domestic filing exception for completing Schedules K-2 and K-3: The final instructions include an exception for filing and furnishing Schedules K-2 and K-3 for tax years beginning in 2022. Under the domestic filing exception, a domestic partnership (as defined under sections 7701(a)(2) and (4) of the Internal Revenue Code) does not need to either (a) complete and file with the IRS the Schedules K-2 and K-3, or (b) furnish to a partner the Schedule K-3 (unless requested by a partner after the one-month date (defined in criterion number 4, below)) if each of four criteria are met with respect to the partnership’s tax year 2022

[mootzie]

I've been following this thread. My question is if there is only US source income listed in part ll of Schedule K-3 and no entry in Part lll of Schedule K-3 and nothing in Box 21 of Schedule K-1, do I need to report the Schedule K-3 if it's generated? It won't be generated until Aug 2023. If I uncheck the box on line 16 and file electronically now, do I file an amended return electronically (if needed) or do I have to do it by paper? 

[tspazok1]

I'm getting no feedback on my question on this thread, so I suggest you start a new thread and throw it out there so everyone can take a crack at answering your question, JMO. I'm afraid that if you uncheck box 16 and your account who sends you the K3 checks it then the computer system at the FED will have a mismatch and flag it, not sure about that. I have no international investors in my K1 and I still don't know why I received a K3.  I received my K3 along with my K1 not sure why yours in coming in August which adds a whole new  complexity to your problem.  

[DaveF1006]

According to this IRS source, "In many instances, a partnership or S corporation with no foreign partners, foreign source income, no assets generating foreign source income, and no foreign taxes paid or accrued may still need to report information on Schedules K-2 and K-3.  

For example, if the partner or shareholder claims the foreign tax credit, the partner generally needs certain information from the partnership on Schedule K-3, Parts II and III, to complete Form 1116.  This information should have been reported in prior years, including before the Tax Cuts and Jobs Act, on the Schedules K and K-1, and is information the partner or shareholder needs to compute the foreign tax credit limitation, which determines the amount of foreign tax credit available to the partner or shareholder".

When you access the link, besure to read number 11 in its entirety.  You may also contact the issuer of the K1 to find out why the K1 was sent to you and what your reporting requirement is.

[Frustrated User22]

I think the issue we are all encountering is that Turbo Tax does not have a box for us to enter US amounts from Column A.  Your system starts with Column B. This shouldn't take until August to add. 

[PatriciaV]

TurboTax does provide entry options for Column A in both the interview and on Schedule K-1.

While entering the K-1 via step-by-step, look for the page "Enter info from your Schedule K-3." In the drop-down for Foreign Country of US Possession, choose "Various" for US-sourced foreign income.

In Forms Mode, open the K-1 and scroll down to Part III Line 14/16. On Line A, use the drop-down and choose "Various" for US-sourced foreign income.

@Frustrated User22 

[tspazok1]

I don't have US-sourced foreign income. I only have US Income as do my partner's. Please refer to this item about country code which clearly states not to use Various or OC.

The revised instructions read as follows to add information on reporting countries on line 24:

Country code. Forms 1116 and 1118 require the taxpayer to report the foreign country or U.S. possession with respect to which the gross income is sourced. On lines 1 through 24, for each gross income item, enter on a separate line (A, B, or C) the two-letter code from the list at IRS.gov/countrycodes for the foreign country or U.S. possession within which the gross income is sourced. If a type of income is sourced from more than three countries, attach a statement with the information required on Schedule K-2, Part II, and Schedule K-3, Part II, for that type of income.

If income is U.S. source, enter “US.” Do not enter “various” or “OC” for the country code.

Really confusing so why doesn't Turbo Tax provide US as a drop down option for US income only K3.

[DaveF1006]

There are other reasons why your K-3 was issued. In the first drop-down you referred to, you would only pick a country if you received foreign income or a Foreign tax credit.  You received US-Based income so you may other income reported other than what is in Part 1 or Part 2. What part is your US -Based income reported in?

[dairyagent]

Box 16 is checked on my K-1 and I also have an entry on line 21.  My K-3 has 25 different countries listed in column "a" - U.S. Source and there are no entries in columns B, C, D, E or F.   The drop-down column on Turbo Tax for Countries does not list the U.S. as an option.  It was also stated that you could lump all the countries together under U.S. Various, but Turbo Tax does not allow you to enter U.S. Various on the K-3 dropdown menu.  How should I enter my 25 counties under column "a" on my K-1 in Turbo Tax?

[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.

[dairyagent]

Thanks for your help!

[tspazok1]

Perfect. I was concerned that if box 16 is checked on your K1 and you don't report your K3 it would red flag it and maybe a letter from the IRS. Thanks