17694: 1040 - 1065 Schedule K-1 - Box 21 and Schedule K-3

Entity Return

Schedule K-1, line 21 displays the amount of Foreign Taxes Paid or Accrued. Details about international partner distributive share items are reported on Schedules K-2 (filed with Form 1065) and K-3 (furnished to each partner). See KB 17944 for more information about Schedules K-2 and K-3.

Partner Returns

Screen K1P is used to enter the information reported on Schedule K-1 from a partnership, however, there is no entry on the K1P screen for line 21 in any return type. Per the 1065 Schedule K-1 Instructions:

"Foreign taxes paid or accrued reduce a partner's basis and are limited to basis. Do not use this amount to complete your Form 1116 or 1118. See Schedule K-3 to complete your Form 1116 or 1118."

For partners that received Schedule K-1 with an amount in box 21, data entry is as follows.

1040 or 1041

Use Schedule K-3 to complete Form 1116 and calculate any available foreign tax credit. See KB 11619 for details on data entry.

1120

Use Schedule K-3 to complete Form 1118 and calculate any available foreign tax credit. See KB 18268 for details on how to complete Form 1118 in an 1120 return.

1065 or 1120-S

Pass-through entities that receive information from other pass-through entities cannot use the information to claim any tax credit; the data from the pass-through entity must be re-entered and continue to pass-through until it gets to an individual partner or shareholder who is allowed to take the credit. Use Schedule K-3 to complete the K-2 Information - International screens (located on the respective SBS K, K-1, K-2, K-3 or PTR K, K-1, K-2, K-3 tab of the Data Entry Menu). (Foreign taxes are entered on screen III4.)