Partnerships and S Corporations with Foreign Activities

• Schedule K-2 – Items of Partner’s Distributive Share – International

• Schedule K-3 – Partner’s Share of Income, Deductions, Credits, etc. – International

What Is This About?

These schedules apply to partnerships and S corporations that have foreign activities, foreign partners/shareholders, or international tax items.

• Schedule K-2: Expands the international tax reporting for partnerships and S corporations, detailing foreign income, taxes, and deductions.

• Schedule K-3: Provides each partner/shareholder’s share of international income, deductions, and credits, helping them comply with U.S. international tax laws.

Why Is This Important?

• These schedules ensure that U.S. taxpayers correctly report foreign income and tax credits.

• They align with IRS and foreign tax compliance rules, such as Foreign Tax Credit (FTC) calculations.

• Failure to file accurately can lead to penalties and IRS audits.