IRS Releases Updated Draft Partnership Return

On July 14, 2020, the IRS and Treasury released proposed redesigned tax Form 1065, U.S. Return of Partnership Income.  The 2017 Tax Cuts and Jobs Act added to the already messy process of partnership tax filing by creating a new class of foreign income (global intangible low-taxed income, or GILTI) and a deduction for foreign-derived intangible income (FDII). The updated form seeks to standardize and streamline the reporting of items of international tax relevance for both partnerships and partners.

Currently, partners are required to report international tax information on multiple forms based on information they receive from the partnership in narrative statements attached to Schedule K-1. Those statements are compiled in a variety of formats and may be burdensome for partners to use in preparing their own returns. The IRS and Treasury released two new draft sections: Schedule K-2, which will include international tax income of the partnership, and K-3, which will break down that information for each partner. These changes are intended to better align the information the partnership provides with the forms the partners themselves complete, and allow the IRS to more efficiently ensure compliance with tax law.  

The IRS and Treasury are actively seeking taxpayer input on the revisions before the form is finalized to use for the 2021 tax year (2022 tax filing season). In addition, the IRS and Treasury announced similar planned revisions to Form 1120-S (U.S. Income Tax Return for an S Corporation) and Form 8865 (Return of U.S. Persons With Respect to Certain Foreign Partnerships) for the 2021 tax year.

 

Key Contacts

 
 
 
© 2021 | Notices