Flow-Through Returns with Missing, Incomplete, and Incorrect Schedules K-1

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Quick Alerts - Technical  March 3, 2020

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Subject: Flow-Through Returns with Missing, Incomplete, and Incorrect Schedules K-1 Attention: Software Developers, Return Transmitters and Authorized IRS e-file Providers/EROs Missing, incomplete, and incorrect Schedules K-1 will limit the IRS's ability to identify potential noncompliance, resulting in the loss of tax revenue and inequitable treatment of taxpayers, as well as potentially creating unnecessary work and increasing taxpayer burden.  We determined that improvements in the receipt and storage of Schedule K-1 data will increase information reliability and availability, which will assist in identifying potential tax noncompliance. Accurate and complete Schedule K-1 data are not always received.  If Schedules K-1 are not provided or contain inaccurate data, the Internal Revenue Code (I.R.C.) provides authority for the IRS to apply a penalty to the flow-through entity submitting the form.   We encourage the software community to put checks in place to ensure:  Required Schedules K-1 are attached to 1041, 1065, 1120S and 8865. The number of recipients reported on the flow-through return equal to the number of attached Schedules K-1. There are correct payee TINs on Schedule K-1.  Noticeable errors include impossible Social Security Administration assigned Social Security Numbers (e.g., starting with 000), repeating digits (e.g., 999999999), and consecutive digits (e.g., 123456789). Ensure the flow-through amounts on the return equal the sum of allocated recipient amounts on attached Schedules K-1. The impacted Tax Forms include: Form 1041, U.S. Income Tax Return for Estates and Trusts, Form 1065, U.S. Return of Partnership Income, Form 1065-B, U.S. Return of Income for Electing Large Partnerships, Form 1120S, U.S. Income Tax Return for an S Corporation and Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships.  For additional information please visit our Form 1065, Schedule K-1 page on IRS.gov. Back to Top Thank you for subscribing to QuickAlerts for Electronic ACA Information Returns, an IRS e-mail service. If you know someone who might want to subscribe to this mailing list, please forward this message to them so they can subscribe. This message was distributed automatically. Please Do Not Reply To This Message.

 

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