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The IRS has issued procedures for furnishing Schedule K-1, Partner's Share of Income, Deductions, Credits, etc., electronically after the recipient has provided consent to receive Schedule K-1 in that format.

IRS Issues Procedures to Furnish Electronic Schedule K-1

  • 2/29/2012

IRS Issues Procedures to Furnish Electronic Schedule K-1

The IRS has issued procedures for furnishing Schedule K-1, Partner's Share of Income, Deductions, Credits, etc., electronically. The recipient must affirmatively consent to receive the Schedule K-1 electronically. The IRS provided several examples of how Schedule K-1s may be furnished electronically.

CCH Take Away: Some partnerships have already been issuing Schedules K-1 electronically, Marc Hyman, CPA, technical manager, American Institute of Certified Public Accountants (AICPA), told CCH. “The firms that have been doing so have acted under a hodge-podge of rules.” Some of these firms may be unsure if Rev. Proc. 2012-17 will be viewed by the IRS as a safe harbor or not, particularly during the current filing season, and if not, whether the IRS will impose penalties on firms that already have other procedures in place. We would hope that the IRS would be lenient with these firms this year and, at a minimum, deem that substantial compliance has been achieved in many of these cases, Hyman said.

Background

Every partnership must complete and file alongside Form 1065, U.S. Partnership Return of Income, a Schedule K-1 for each of its partners. A copy of Schedule K-1 must also be sent to each partner.

Comment: Generally, K-1s must be provided to recipients by the due date of Form 1065. For partnerships operating on a calendar year, the due date is April 17, 2012.

Electronic K-1s

Under Rev. Proc. 2012-17, a person required to furnish a Schedule K-1 may provide the Schedule K-1 in an electronic format in lieu of paper. A furnisher who meets the requirements of Rev. Proc. 2012-17 will be treated as furnishing the Schedule K-1 in a timely manner, the IRS advised.

Consent. Before a Schedule K-1 may be furnished electronically, the recipient must affirmatively consent to receive Schedule K-1 in an electronic format. Consent, the IRS explained, may be made electronically or on paper.

Scope. The recipient must be informed of the scope and duration of consent. The IRS explained, for example, that the furnisher must inform the recipient whether the consent applies to each Schedule K-1 required to be furnished after consent is given, or only to the first Schedule K-1 required to be furnished after consent is given.

Disclosure. The furnisher of Schedule K-1 must provide a disclosure statement to the recipient describing consent and withdrawal of consent to furnishing Schedule K-1 electronically.

Withdrawal of consent. The recipient of the Schedule K-1 may withdraw consent. Withdrawal of consent may be by writing (electronically or on paper) to the furnisher. If consent is withdrawn before the Schedule K-1 is to be furnished electronically, the Schedule K-1 may not be furnished electronically.

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