New 2018 Schedule K-1 Items for Partnership Returns: Meeting Complex Compliance Issues

Proper completion of a client's federal Schedule K-1s to report a partner's share of a partnership's income, gains, losses, etc. has long presented challenges to tax advisers, particularly for specialized investment partnerships such as fund of funds or master limited partnerships. Changes to the Schedule K-1 beginning with the 2018 tax year may create additional complexity for partnerships and their tax advisers.

The K-1 for the tax year 2018 introduces several substantive changes to prior years' reporting requirements. The updated Schedule requires taxpayers to disclose the recipient partner's beginning share of partnership liabilities, as opposed to only the ending amount, which will help in tracking a partner's basis. Additionally, partnerships will need to report negative tax basis capital interests for partnerships not using tax basis to calculate capital account balances. The IRS issued guidance offering penalty relief for taxpayers omitting this reconciliation under specified circumstances.

The most substantial changes to the K-1 involve the new foreign information and repatriation provision created by the 2017 tax reform law. Partnerships must report each partner's share of the entity's foreign inclusion amounts under Section 951 GILTI, Section 965(a) transition tax, and Subpart F income other than GILTI or 965 transition items.

The new form adds further codes in Box 16 for foreign transactions while eliminating or replacing some Code items in Box 13 other deductions. These changes will create additional disclosure and schedule requirements for partnerships with foreign holdings, or non-tax basis capital account reporting. Tax advisers will need to factor in these new items in completing K-1s for impacted partners.

Listen as our expert panel provides a practical guide to completing Schedule K-1, with a focus on the new reporting items presented in the 2018 form.

1. Review of Schedule K-1 data, including footnote information
   1. Partner information
   2. Basis schedule, capital accounts, and passive activity losses
   3. Partner's share of current-year income and other items
   4. Ownership percentages
2. New partnership liability share calculations
3. Additional basis reporting rules
4. New foreign information requirements

The panel will cover these and other relevant topics:

• Making correct decisions about shares of income, loss, gain and credit on a K-1
• Understanding the importance of classification and allocation of partnership liabilities on a Schedule K-1, and how the 2018 form requires additional liability share tracking
• The changes to partnership capital account and negative basis reporting on Schedule K-1 beginning in 2018
• New foreign information reporting requirements

Learning Objectives

After completing this course, you will be able to:

• Decide the classification of income, loss, gain and credit on a K-1
• Identify the importance of classification and allocation of partnership liabilities on a K-1 and the new reporting requirements
• Discern the additional capital account analysis and negative basis reporting components of Part II, Item L of the Schedule K-1
• Recognize the new foreign information reporting in Boxes 11, 16 and 20

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, preparing complex partnership and partners' tax forms and schedules; supervisory authority over other preparers/accountants. Knowledge and understanding of preparing Schedule K1s for publicly traded partnerships, reporting information from reconciliation schedules to a partner's income tax return, basis schedules, capital accounts and at-risk amounts; familiarity with the oil & gas industry, passive v. non-passive income and dispositions.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).