CALL US:+1-800-322-7776
CHAT NOW

The IRS has posted updated Filing Requirement Exceptions for Schedule K-2 and K-3 as of June 4, 2025. Although these changes were posted in 2025, they are retroactive to the 2024 tax year.

Host ⁠Jerry Hammel, CPA,⁠ is joined by ⁠Greg Lambrecht, CPA⁠, and ⁠Jason Rauhe, CPA⁠, for a timely discussion on the future of international tax planning as we approach the potential sunset of the Tax Cuts and Jobs Act (TCJA).

The U.S. dropped its proposed Section 899 tax after a G7 deal eased global tax tensions for American businesses.

 

The Senate’s “One Big Beautiful Bill” proposes major international tax changes, creating both planning opportunities and compliance challenges for CPAs advising global clients.

 

Think forgetting to file an FBAR is no big deal? One taxpayer just got hit with $3.24 million in penalties. Find out how it happened—and how to avoid the same fate.

The IRS has released updates to Rev. Proc. 2025-23, refining the list of accounting method changes eligible for automatic approval. These changes streamline guidance in several areas but introduce new limitations for international tax adjustments that global teams should review closely.

Summer may bring vacations, but international tax obligations don’t take a break. McGuire Sponsel highlights key summer filing reminders—like FBAR deadlines, GILTI reporting, and travel-related risks—to help taxpayers avoid penalties and stay compliant.

Section 899 could significantly impact foreign investors and multinational clients by targeting income from countries aligned with global minimum tax rules. CPA firms should prepare for potential compliance burdens and cross-border tax planning changes.

 

The IRS has released new guidance modernizing how digital content and cloud transactions are classified and sourced for tax purposes—changes that could significantly impact SaaS, tech, and media companies with cross-border operations.

 

Guest host Jerry Hammel, CPA, discusses planning opportunities in the current tariff environment with Jason Rauhe, CPA, and Ben Worrell, MBA. They explore transfer pricing, Location Advisory, and how businesses can leverage these strategies amid tariff uncertainties.

IRS Issues Retroactive Changes to Schedule K-2 and K-3 Reporting Rules

The IRS has posted updated Filing Requirement Exceptions for Schedule K-2 and K-3 as of June 4, 2025. Although these changes were posted in 2025, they are retroactive to the 2024 tax year.

These exceptions are an expansion of Criterion 2 of the existing domestic filing exception for partnerships. True to the name, the domestic filing exception is a narrow exception to the otherwise mandatory filing of Schedule K-2 and K-3 for domestic partnerships. For those unfamiliar, the criterion for the domestic filing exception is as follows:

    1. No or limited foreign activity
    2. All partners are U.S. persons or Resident Aliens (to be expanded upon)

If the above are both met, the following additional conditions apply:

    1. The partners have received a notification that unless they elect to receive a K-3, it will not be provided to them. At the very latest, this must be completed at the time the partnership furnishes schedule K-1 to the partners.
      • A. Partners have the option to inform the partnership that they will automatically elect to receive this schedule every year, in which case the partnership will be required to file these schedules until such election is revoked by the partner.
      • B. If a partner elects to receive a Schedule K-3 and the partnership meets criteria 1, 2 and 3, the partnership will only be required to file Schedules K-2 and K-3 for the sections relevant to the requesting partners.
    2. The partners have not requested a Schedule K-3 within 1 month of this notification being delivered.

Before the June 4 update, Criterion 2 qualifying direct partners included:

    1. U.S. Citizens
    2. Resident Aliens
    3. Domestic Decedents Estates with beneficiaries that qualify as persons (A) or (B)
    4. Domestic Grantor Trusts not considered Foreign Trusts
    5. Domestic Non-Grantor trusts with solely beneficiaries that qualify as persons (A) or (B)
    6. S-Corporations
    7. Single Member LLCs, where the sole member is one of the persons in (A) through (F)

A significant change to the domestic filing exception announced by the IRS is the inclusion of domestic partnerships among Criterion 2’s Qualifying Direct Partners. This applies if the direct partners also meet Criterion 2 and all other qualifying criteria. It’s vital to note that this “Look-Through” provision is expected to apply only one tier above the partnership, likely resulting in limited effects on larger pass-through structures.

If you’re unsure how these updated exceptions apply to your partnership or need help navigating complex tiered structures, our Global Business Services team is here to help. Contact us today to discuss your specific filing obligations and ensure full compliance with the latest IRS guidance.

  • featured-image

    Josh Riker, CPA

Josh Riker, CPA, is a Senior Tax Consultant in the firm’s Global Business Services practice and is responsible for assisting clients and adding depth in all areas of the firm’s international tax consulting services, including preparing client calculations, international forms, IC-DISC tax returns, and transfer pricing documentation.

Recent Resources