Filing Rules Ease for Partnerships and S Corporations
The IRS has rolled out changes that will make tax season a little easier for many partnerships and S corporations starting with 2024 returns. The update expands exceptions to filing Schedules K-2 and K-3, forms that have often added time, cost, and complexity to the filing process.
What are Schedules K-2 and K-3? Over the past few years, partnerships and S corporations have been required to file these additional schedules along with their tax returns. These schedules provide detailed information on foreign-related items, such as income and taxes paid abroad, that can affect partners and shareholders. Additionally, they are important for businesses with international activity. But for smaller, domestic entities, they’ve often felt like extra paperwork without much benefit.
Starting with the 2024 tax year, certain partnerships can skip Schedules K-2 and K-3 altogether if they meet all of the following conditions:
- Annual gross receipts under $250,000
- Year-end total assets under $1 million
- Schedule K-1s filed on time and provided to partners by the due date (including extensions)
- No Schedule M-3 filing requirement
- No partner requests a Schedule K-3 (requests must be made within one month of the return’s due date)
S corporations also benefit from this update. They can avoid filing the schedules if both total receipts and assets are under $250,000, and none of their shareholders request a Schedule K-3.
These adjustments show the IRS is listening to feedback from taxpayers and professionals alike. While these schedules remain critical for entities with foreign operations, the new rules remove an unnecessary hurdle for smaller, domestic businesses—helping to cut down on administrative effort without sacrificing compliance.
If you’re unsure whether your business qualifies for these new exceptions, or if you have questions about your specific situation, reach out to your WG advisor.
