What is the K series of tax forms?
In the United States, business partners or S-Corp shareholders report their share of dividends, income, or losses on their personal tax returns. They receive Schedule K-1s from the entity in which they have an ownership interest to obtain the necessary information for reporting.
For companies with significant foreign transactions, Schedule K-2 and Schedule K-3 are required supplemental forms that replace the foreign amounts previously reported on Schedule K-1s.
The business is responsible for preparing these informational forms and providing them to each member. Entities required to file Form 1120-S, Form 8865, or Form 1065 must generally report using these schedules.
When are the K-1s due to shareholders or members? What is the penalty for non-compliance?
Schedule K-1 must be provided to partners or shareholders by March 15th each year.Failure to furnish a Schedule K-1 on time results in a $260 penalty per instance by the IRS. For an entity with 10 members, failing to provide K-1s would incur a penalty of $2,600, as the penalty applies to each member or shareholder individually.
What about K-2s and K-3s?
In 2022, failing to file Schedule K-2 and Schedule K-3 when required, or not completing them properly, incurs penalties of $210 per month per partner or shareholder. These forms, ranging from 10 to 20 pages, are necessary for preparing individual tax returns, similar to Schedule K-1.
Under Section 6038, companies face penalties for non-compliance or improper reporting of foreign transactions and information. Since foreign transactions are part of K-2 and K-3 filings, improper filing can result in penalties of up to $10,000 per entity for a given tax year.
Do you have any other questions?
At Startxpress, we help your company stay compliant with all necessary schedules. We verify that each schedule reaches its intended members accurately. Additionally, our certified accountants stay updated with the latest IRS guidelines. As a result, we provide exceptional service, even when new standards or forms are introduced.
For further insights, explore the Startxpress Help Center and Blog. If you have questions or need support, reach out anytime at support@startxpress.io!
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