The Details
On December 5, 2022, the IRS released the updated draft of 2022 Schedules K-2 and K-3 and accompanying instructions providing details on the filing relief for “domestic only” partnerships.
To qualify for the domestic filing exception in 2022, the following four criteria must be met at the partnership level:
- The partnership has either no or limited foreign activity.
- All partners are U.S. citizens or resident aliens.
- A notification is issued to the partners stating that partners will not receive Schedule K-3 information from the partnership.
- No requests are received for the 2022 Schedule K-3 information on or before August 15, 2023.
What Does This Mean for You?
First and foremost, as an investor in a partnership, you have no responsibility to make the above-noted determinations. All determinations for this domestic filing exception will be made by the partnership, its management team, and its tax provider.
However, if you invest in partnerships that qualify for this filing exception, you may receive a notice or communication from the partnership advising you that you will not receive Schedule K-3 information for the preparation of your 2022 return. The partnership may issue this letter separately or it may be included as part of the Schedule K-1 issued to you in 2023.
If you receive a letter or other communication from the partnership, there is no immediate need to connect with your Wolf engagement team as we are aware of this exception and process. Instead, please provide this notice or communication to us as part of your tax return preparation process in 2023.
Please reach out to your engagement team with any questions on this matter.
