Partnership Tax filing requirements are unpredictable, cumbersome, and laborious. With filing needs changing from year to year, it can be challenging for accounting firms to keep up with new IRS filing requirements, moreso efficiently and at scale. The usage of fragmented, non-standardized excel spreadsheets has been a quick way for internal teams to meet updated filing requirements. Given what’s possible with technology today, is that the ideal long-term solution to keep up with inevitable filing requirements updates? Now more than ever, accounting firms need to leverage new technologies to gain agility at scale, process adjacency, and synergetic efficiencies.
On April 30th 2021, the IRS released early drafts of new Schedules K-2 and K-3 for Forms 1065, 1120-S, and 8865 for tax year 2021 (filing season 2022). As part of the updated requirements, it is now mandatory that all Pass-through entities (Partnerships, S-Corp, Sole proprietorship, Trust, and LLC) with international tax items/partners complete Schedules K-2 and K-3 as part of their 2022 tax filing. Per the IRS, “The new schedules K-2 and K-3 were created to provide consistency in the reporting to partners and shareholders, and replaces line 16a-r, portions of line 20, and numerous unformatted statements attached to prior versions of the Schedule K1”. How can accounting firms implement effective, long-term, and uniform processes to handle the addition of Schedules K-2 and K-3?
Imagine being able to update Schedules K-2 and K-3 data in one application. What if you could:
- Easily generate both consolidated and partner K-1 reports with Schedules K-2 and K-3 stitched immediately.
- Maintain the comfort and familiarity of excel for data input, without sacrificing firm-wide process fragmentation.
- Eliminate repopulating half of Part II Foreign Tax Credit Limitation sections 1 & 2 with data you have in 5 different excel files.
- Push data directly to your locator of choice within your tax filing software of choice (CCH/Gosystems) in the same application.
Orion has made all of this a reality. Through digital innovation, we have created a digital solution enabling tax professionals to:
- Generate per partner K-1 packages with their prepared Schedules K-2 and K-3’s stitched together and share the package electronically with their clients for their individual filing.
- Download/upload a predefined and uniform excel template to prepare Scheduled K2 and K3.
- Leverage synergies from the Allocations, Book-to-Tax, and Partner Information modules so preparers input data only once, eliminating redundant data entry/rework.
- Push Schedule K-2 and K-3 data directly to their chosen locator on either Gosystems or CCH.
One firm at the forefront of tax and technology adoption is EisnerAmper. They recently invested in a sophisticated partnership tax allocation platform. “Harnessing the power of the platform we built, we were very quick to adopt the regulations of K2/K3. We were able to generate K2/K3s for FY2022 within 90 days of the IRS releasing the guidelines. Needless to say, this was a big win for us, and a great ROI of our technology investment.” Laura Macca, Executive Director Digital Transformation Leader, EisnerAmper.
With regulations constantly changing, the opportunity to design and implement transformative tax and accounting business solutions has never been greater. Technology helps tax professionals spend less on compliance and financial reporting and more on strategy, planning, and managing risk. And, in an ever-changing tax environment, accounting firms can thrive by integrating world-class solutions that drive better business outcomes.
For more than 25 years, Orion Innovation has partnered with large and mid-sized tax and accounting firms and global enterprises to develop and integrate innovative digital-first solutions. With domain experience deep-rooted in strategy, experience design and engineering, we can help you automate and scale.
Learn more about our expertise here.