Relief Comes with Its Problems! IRS Provides Schedules K-2 and K-3 Transition Relief

The IRS recently announced transition relief in its News Release IR-2022-38 and frequently asked questions regarding conditions under which eligible passthrough entities will not have to file new Schedules K-2 and K-3 for tax year 2021.  Schedules K-2 and K-3 are new for this tax filing year and have been the subject of some negative commentary among tax practitioners. The relief applies in various scenarios, notably where the direct partners in the domestic partnership are not foreign partnerships, foreign corporations, foreign individuals, foreign estates, or foreign trusts.

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• IRS Clarifies Reporting Relief For Some Partnerships
  See how, in IRS News Release IR-2022-38, IRS supplements the transition relief provided in IRS Notice 2021-39, to apply an additional exception for tax year 2021 to filing the Schedules K-2 and K-3 for certain domestic partnerships and S corporations.

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