What’s likely to compound the filing headaches (and the number of forms), is the Internal Revenue Service’s pledge to expand enforcement: The agency is now paying closer attention to people’s digital assets and interests overseas.
“Besides the filing of their individual tax return, taxpayers may need to file other separate forms [if] they have certain foreign investments or bank accounts or if they transact in digital assets,” Brandenburg said. Those who don’t make these separate filings on time could face steep penalties, he added.
Previously, he said, “there was a section on Schedule K-1 that dealt with foreign tax amounts that needed to be reported to the recipients. Beginning in 2021, however, this foreign tax information was significantly expanded and is now reported on a separate, new IRS form for the recipients, a Schedule K-3.”
The K-3, he said, handed out by partnerships to partners, ran 20 pages for the 2022 tax year.
Here’s an IRS form that clients should keep in mind: Form 4868, otherwise known as the “Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.”
“We remind taxpayers that filing an extension only extends the time to file their tax return, not the time to make any tax payments,” Brandenburg said, adding that a special projection of tax liability is often needed to determine what taxpayers will have to fork over by the April 15 due date.