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2023 K-1 instructions shake up CAMT rules for partnerships, corporations.

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TLDR:

Key Points:

  • IRS released updates to the 2023 Partner’s Instructions for Schedule K-1 on April 9.
  • New instructions introduce compliance burdens related to Corporate Alternative Minimum Tax for partnerships and their corporate partners.

New 2023 K-1 instructions stir the CAMT pot for partnerships and corporations

The Internal Revenue Service released a post-release change updating the 2023 Partner’s Instructions for Schedule K-1. This update brings new compliance burdens for partnerships and their corporate partners, particularly related to the Corporate Alternative Minimum Tax (CAMT).

The instructions require certain partners to request CAMT information from partnerships in writing and retain this information in their records. The move suggests a potential “bottom-up approach” for determining partnership AFSI in the future, indicating a more complex CAMT landscape for partnerships.

Partnerships need to be prepared to furnish CAMT information to partners upon request to avoid penalties. Corporate partners filing Form 4626 must request specific information from partnerships with corporate partners to determine their share of AFSI.

The updated instructions for Schedule K-1 Box 20, Code ZZ reflect the new CAMT information request requirement. However, the timing, format, and bottom-up approach for determining partnership AFSI still need clarification, impacting 2023 tax returns and hinting at future complexities.

Tax professionals should stay updated on further guidance from the IRS on CAMT regulations as the landscape evolves.

By Mark Friedlich


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