The IRS has delayed by more than a month the rollout of an electronic filing protocol for Schedules K-2, Shareholders’ Pro Rata Share Items — International, and K-3, Shareholder’s Share of Income, Deductions, Credits, etc. — International, filed by S corporations.
The Service revised the date in an update Wednesday to a frequently asked question (FAQ) on its website. When first posted on Feb. 26, 2022, FAQ 7 said the versions of the schedules that are filed with Form 1120-S, U.S. Income Tax Return for an S Corporation, would be able to be e-filed on its Modernized e-File (MeF) platform via Extensible Markup Language (XML) by mid-June 2022. Now a table in the updated FAQ 7 says that capability will go live on July 24.
The schedules, new for the 2021 tax year, are required to be filed by passthrough entities with “items of international tax relevance” and taxpayers filing Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships.
There is no change to the original forecast that MeF/XML capability for filers of Form 8865 will become available in January 2023. The MeF/XML partnership versions of Schedule K-2, Partners’ Distributive Share Items — International, and Schedule K-3, Partner’s Share of Income, Deductions, Credits, etc. — International, that are filed with Form 1065, U.S. Return of Partnership Income, have been available since March 20, 2022.
Despite the current unavailability of MeF/XML versions for S corporations and filers of Form 8865, affected taxpayers and entities may attach the completed 19- and 20-page schedules to their returns in PDF format for e-filing if their software enables it.
Form 1120-S is generally due for calendar-year S corporation filers on March 15 and, for those with fiscal tax years, on the 15th day of the third month following the end of the tax year, both with a possible extension of six months (to Sept. 15 for calendar tax years).
The IRS last updated the Schedules K-2 and K-3 FAQs on April 11, when it added eight new FAQs clarifying that filers are required to complete only the forms’ relevant portions (see FAQ 19) and addressing questions regarding particular types of filers and items requested on the forms (FAQs 20–26).