Schedule K-1 for Limited Partnerships and LLCs

Eliminate errors and gain a better understanding of the K-1.

Many people know that a Schedule K-1 exists for limited partnerships and LLCs which are treated under the Federal tax law as a pass-through partnership. However, far fewer people understand how every part of the Schedule K-1, the 'four corners' of the form, contain 'partnership items' that are of importance when it comes to any IRS audit. Over the years, the Schedule K-1 has undergone important changes that highlight different issues of importance to the IRS. Understanding that history, those changes, informs those who are tasked with filling out or interpreting Schedule K-1s. Far too often, a Schedule K-1 is viewed as definitive on a legal or tax issue, when, in fact, it is just a starting point. What to do when the Schedule K-1 is in error, and the steps that need to be taken to try and fix the Schedule K-1, before filing IRS Form 8082 (Notice of Inconsistent Treatment) is critical, as is knowing the underlying baseline partnership or operating agreement and/or the partners' understanding. Practitioners must also know about BBA Partnerships, and whether one is able to opt out of the BBA Partnership audit rules, and the implications of those rules. One also must know how the Schedule K-1 interacts with other schedules, like Schedule K-2 and Schedule K-3 and uses 'codes' to assist the end user when receiving the Schedule K-1. Trying to master the 4 corners of the Schedule K-1 is easier said than done. That being said, in this presentation, we look to review best practices aimed at error identification and resolution. We will also review the latest developments impacting Schedule K-1 preparation and analysis.

Faculty

T. Scott Tufts, Esq.

CPLS, P.A.