“Due to the various nuances and process needed to track, document and communicate to partners about the change, many partnerships may decide to complete Schedules K-2 and K-3 for 2022 to provide consistent treatment with what had been done for 2021 and to provide all information to their partners,” Racer-Robinson said. “Some of the FAQs and other clarifications provided by the IRS should hopefully make the process more streamlined.”
Some have expressed frustratration with the additional reporting and the expenses to comply – especially considering that the reporting was for details considered material or non-applicable to many organizations. The form being mandatory from the IRS – with failure-to-file penalties – leave partnerships with little choice.
“Communicating the new notification process to clients is most important,” Keller said. “If a client fails to meet the notification deadline, they’re required to file the schedules even without foreign activity. Determining if the client meets the exception by Jan. 15 may also prove difficult if they’re unable to obtain good financial information for [this] year end.”
There’s potential for further updates to these schedules’ instructions, Keller said.