TurboTax Newly added K-3 has a bug - need fixing

[Tony007]

Has anyone come up with a work around to get these forms filed?  Seems Turbotax isn't going to fix it, so a work around would be nice.

[PatriciaV]

In light of the experiences reported here and in other threads, the best option would be to file an extension. Since the 1120-S Schedule K-3 won't be released by the IRS until mid-summer, there will most likely be additional software updates before the filing deadline in October. 

Your other option is to complete Schedule K-3 manually and attach to a paper filed return. This is understandably not the most popular choice.

Additional info: 

• IRS Forms & Instructions
• How do I file an IRS extension (Form 4868)?

[Tkseattle]

This worked for me. Thanks!

[rv2]

Thnx much @PatriciaV  

Just a clarification: You said "1120-S Schedule K-3 won't be released by the IRS until mid-summer" - the conversation here is about the "Schedule K-3 (Form 1065)". 

Can I assume that your response applies for this variation as well? 

[JGreene-B]

It's now mid-September and I do not see any updates in the software fixing this issue. I filed an extension but time is almost up for the extension and it's still not clear how to get past the K-3. 

There's no way to enter a total deduction for lines 54 and 55 for US source in Part II of the K-3 worksheet. I've already laid out several hundred to pay for this version of TT and would to have to scrap and file manually (hard copy) after all this.

Any ideas?? 

[rv2]

Hello @PatriciaV  - we have another 3 weeks left to file the taxes.

I see the K-3 issue even in the latest version that I just downloaded. What is your suggestion on the way forward now? 

Sincerely 

[KB-Tx]

I too filed for an extension and patiently waited for TurboTax to release a fix for the K-3 issue.

However, as time is rapidly approaching for the extension filing deadline, it has become clear to me that TurboTax has punted on this issue for the 2021 tax filing season. Perhaps I'm wrong and they'll still come through before the deadline, but they've had five additional months and still nothing.

So, yesterday I decided not to wait any longer. I printed my TurboTax return as is, attached the K-1 and associated K-3 from my REIT and mailed it all in to the IRS. In my case, the printed return did not include a TurboTax version of the K-1 (or bits of the K-3 I was able to enter), merely entries from it on the appropriate line items on the 1040 and associated forms. The details from the REIT K-3 also didn't appear to impact anything else in the return, merely adding details for the IRS to track. However, given the complexity of the forms, I can't be 100% certain of that. That was the whole point of waiting for the TurboTax fix, to have confidence all the numbers would be entered correctly and carry through appropriately.

Bottomline: This solution is hardly ideal and as I stated I'm not entirely satisfied with the result, but at the moment it's seems to be the only option available using TurboTax. Hopefully, the IRS will be satisfied and accept the result as a good faith effort to comply with the tax regulations.

Keep in mind that I'm not a tax professional, just another person trying to get their taxes done. Looking back, perhaps taking it all to a tax pro would have been a better option. I'll definitely consider that next year given how poorly TurboTax handled this issue. Maybe sooner if I get audited.

Good luck.

[Mike9241]

the K-1/K-3  are not actually submitted in an e-filed return. just some of the numbers - and not all such as Part II J, K and L. if you want the IRS to get an actual copy of the K-1/K-3 you would have to attach it to your return and mail it in. there is a good chance that once it gets to a clerk to process the k-1/k3 would be tossed since there is no way for them to enter all the data in their computer. I have seen multiple k-3's and many have no relevant numbers that would flow to or affect any forms or schedules in a US citizen's return.  so it may be quite proper that you don't see any of the k-3 data you entered anywhere in your return.  

[JGreene-B]

Update: 

I just found the following text on the IRS website on page 1 under General Instructions (I put the link in the "who must file" heading). I think I will go by this and just not include the K-3. Hopefully, it will be the right call.

Who Must File

The S corporation need not complete these schedules if the S corporation does not have items of international tax

relevance (typically, international activities). Any S corporation that is required to file Form 1120-S and that has items relevant to the determination of the U.S. tax or reporting obligations of its shareholders under the international provisions of the Internal Revenue Code must complete the relevant parts of Schedules K-2 and K-3. See each part and section for a more detailed description of who must file each part and section. 

[JGreene-B]

Actually, TT keeps altering the URL. But if you google IRS k-3 form you can find a link to the document.

[rv2]

🤔 we did not hear back from the TT experts who are monitoring these forums.

In any case, I managed to get TT to do what I think the IRS wanted us to do, and the results came in line with what I was expecting, and e-filed my returns and the IRS accepted it! Whew!  

Here's how I went about it. 

My K-1s are (probably) middle of the road complexity. And since my "foreign taxes" were paid to multiple countries, and are from a RIC (Reg Inv Co), I decided not to separate the taxes by country.  My foreign incomes were all interests and dividends, while associated expenses were all interest and business expenses. So, foreign taxes became relatively simple! 

Here's how I went about entering the K-3 info (after clicking Yes to Box 16) - here it is, TT screen by screen: 
 

Pg 1. Foreign Country - RIC 
Pg 2. Income - K-3 II, Sec I, Line 24
          Ignored the Titles that TT used, BUT just used the col ids (like B C F G etc) and provided the values in the corresponding TT boxes. 
          I had values only for Col C, F and G 
Pg 3. Deductions - K-3 II, Sec 2, Line 54
         Again, Ignored  the TT and K3 Col headings and used only the Col ids like in Pg 2 -- I had C, F and G. 

         Entered Col C info as is 

         For the F box, I entered the sum of the values in Col F in Lines 39-43 in my K-3 (the values were in the earlier page on my K-3)

         For the G box, I entered the diff between the "K-3 Line 54 Col F" value and the sum in the line above (entered in TT F box)! 

Pg 4 Forn Taxes paid - K3 Part III Sec 4 (Pages 8 and 9 - combine horizontally to one wide page)
         Relatively straight forward 

Pg 5 Sources of Income and expenses  - Used info in K3 Part X 
         Gross Inc - Sec 1 Line 21 provides the Foreign value in the two cols D and G
                                                    Enter the sum of D and G in "Foreign" box in TT and the US Source is auto calculated. 
         Int Exp - Sec 2 : Entered the Foreign values for "Int" and "Other" and TT calculated the US Source again. 

And Voila....that was it!

Looking back, Pg 3 was the tricky one because the TT language was not easy to understand. Hopefully, the TT people get this language right by the next year. 🙏  @PatriciaV 

[rv2]

KB - I do not know the complexity of your K-3 - but for me, the TT K-3 worked with some assumptions 🤐 - pls see my K-3 process which I documented in a separate post today  -  definitely, the TT language left a lot to be desired.  Hope we do not have the same battle next year!!!

[Gene357]

A year later and TurboTax 2022 still has this bug as well as others in 1065 K-3. There is no US Entity to select AND there does not seem to be an easy way to enter multiple Entities.

US is a valid entry and is apparently needed for some customers in complicated tax situations. This is on a valid K-3 for the second year in a row and no meaningful response from TT last year...not holding my breath this year.

If TurboTax had an actual issue tracking system, I would maintain the issue is still unresolved and in need of Developer attention.

[ANDY012408]

My schedule K-1, box 16 is checked (k-3)

my attached K-3 only lists a single entity (US) as the foreign country or US possession.

the foreign country or US possession; US possession IS NOT AVAILABLE on TURBO TAX

So, on my schedule K3, part 2, line 24 and it shows total gross income US $1797.

But on the turbo tax it shows Foreign gross income $1797

does TurboTax plan to add the US to the list and handle those inputs?

OR SHOULD I UNCHECK BOX 16 ON K1? please advice

[ANDY012408]

same issue

My schedule K-1, box 16 is checked (k-3)

my attached K-3 only lists a single entity (US) as the foreign country or US possession.

the foreign country or US possession; US possession IS NOT AVAILABLE on TURBO TAX

So, on my schedule K3, part 2, line 24 and it shows total gross income US $1797.

But on the turbo tax it shows Foreign gross income $1797

does TurboTax plan to add the US to the list and handle those inputs?

OR SHOULD I UNCHECK BOX 16 ON K1?