Trap Averted (For Now) - K-2/K-3 Preparation Delay

Well, that was quick...what a difference a week makes.

Due to the overwhelming pressure from CPAs, State Societies, Enrolled Agents and other organizations, the IRS announced ​late on Tuesday February 15th that certain domestic partnerships and S corps qualify for special relief from having to prepare the new K-2 and K-3 forms if they have no foreign activities, foreign partners, or shareholders. The IRS said, "For 2021, these qualifying domestic partnerships and S corporations will not have to file the new schedules,” ... “We are taking this step in response to feedback we received from the tax community and our stakeholders. The IRS will provide full details of this relief soon.”

It seems we have an extra year to get processes in place to determine if the individual taxpayer owners of pass-through entities are eligible to file Form 1116 to claim a foreign tax credit and thus the entity needs to file the K-2/K-3 forms. Hopefully, it won't be as hectic in 2023 when trying to file next tax season.