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Note from the Editor: a reminder that while you are wrapping up the business entity returns, that a notice is to be sent to ALL shareholders/partners with their Schedule K-1 regarding the availability of the Schedule K-3.

Under the revised rules for the domestic filing exception (DFE) regarding Schedule K-3, if the business entity (either the S-Corporation or the Partnership) does not have a foreign filing requirement and no request is received from the shareholders/partners then the Schedules K-2 and K-3 are not required to be filed. However, if a request is received for the Schedules after the one-month date then the Schedule K-3 must be provided for the requestor. In order to comply with the DFE regulations, a notice must be provided with the Schedule K-1 that the K-3 will not be provided.

Under the revised instructions, an eligible partnership/S corporation that wants to avail itself of the domestic filing exception can:

  • Inform partners/shareholders that no Schedule K-3 will be provided as late as Schedule K-1 is sent to the partners/shareholders, and this information can be an attachment to the K-1.
  • If the partner/shareholder wants Schedule K-3, it is the duty of the partner/shareholder to request it from the partnership/S corporation. If this request is made after the one-month date of the filing of the return, the Schedule K-3 only needs to be provided to the requestor and is not sent into the IRS (therefore, no amended return is needed)