Menu

Search

Knowledge Base


17945: 1120S - Schedule K2/K3 (Drake22)


1120S S corporation

Is there an exception to filing Schedule K-2 or K-3 this year? How do I include Schedule K-2 and K-3 for an s-corporation through Drake22? 

 

The IRS draft instructions (December 2022) required an exception to be filed two months prior to the due date of the return (January 15th for calendar year filers). That was changed by IRS and the final instructions have different guidelines for claiming an exception for certain entities, called the domestic filing exception.

The following is adapted from the 2022 Instructions for Schedules K-2 and K-3 (Form 1120-S). A s-corporation does not need to complete and file with the IRS the Schedules K-2 and K-3, or furnish to a shareholder* the Schedule K-3 if all of the following are true:

  1. No or limited foreign activity. 
  2. All shareholders must be notified that they will not receive Schedule K-3 from the s-corporation unless they request the schedule.
  3. No shareholders submit a request to receive Schedule K-3 to the s-corporation 1 month before the date the s-corporation files the return. See the instructions for details on this request and what to do if a request is received.

Selections are available on the K screen > Credits tab > line 14.  


The options are as follows: 

  1. Schedules K-2 and K-3 are not required. 
    1. Schedule K, box 14 is not marked.
    2. The following message is printed below box 14: Qualified for exception to filing Schedule K-2.  
    3. Schedules K-2 and K-3 are not produced. 
    4. A statement page, K3EX STM, is produced for each Schedule K-1 to notify the shareholders that they will not receive Schedule K-3. This wording cannot be changed, but you can use screen K3G to provide additional information to the shareholders. 
    5. Note 822 is generated.
  2. Schedule K-2 is required. Schedules K-3 are required and will be produced for all shareholders. 
    1. Must make additional entries on the applicable K-2 screens (located on the right side of the SBS K, K-1, K-2, K-3 tab). 
    2. Schedule K, box 14 is marked. 
    3. Schedules K-2 and K-3 are produced. Note that Schedule K-3 is printed for each shareholder in their K-1 set. 
    4. Note 823 is generated. 
  3. Schedule K-2 is required. Produce Schedules K-3 for applicable shareholders indicated on screen K1. 
    1. See the F1 field help for more info on this option. 
    2. Schedule K-2 is printed.
    3. Schedule K-3 is included in the K1 set for each shareholder that has a "K-3 Print Option" marked on screen K1E.
    4. Note 824 is generated.
  4. Schedule K-2 is NOT required. Produce Schedules K-3 for applicable shareholders indicated on screen K1E. 
    1. See the F1 field help for more info on this option. 
    2. Schedule K-2 is not produced.
    3. Schedule K-3 is included in the K1 set for any shareholder that has the Shareholder Only box marked on screen K1E.
    4. Note 825 is generated.
Once you have selected the appropriate option, ensure that required entries have been made on the screens under K-2 Information - International on the SBS K, K-2, K-2, K-3 tab. Note that a Schedule K-2/K-3 will not generate unless a selection is made in the Country code or Other Source of Information dropdown on the II1 screen. The K2EX STM is transmitted to the IRS, if completed in data entry. 

Related Links


Also In This Category


On a scale of 1-5, please rate the helpfulness of this article


Not Helpful
Very Helpful
Optionally provide private feedback to help us improve this article...

Thank you for your feedback!


Details
Article has been viewed 4.3K times.
Last Modified: 9 Months Ago
Article not rated yet.
Options