Schedule K-2 is the IRS form that partnerships need to file with their club's Form 1065 tax return if the partnership has certain foreign income, foreign partners or foreign activities.

Schedule K-3 is the corresponding IRS form that partnerships generate and give to partners. The individual partners use the Schedule K-3 when they prepare their personal income tax returns.

The IRS started requiring the Schedule K-2 and Schedule K-3 forms for the 2021 tax year. Bivio generated the Schedule K-2 and Schedule K-3 forms with your 2021 investment club tax documents.

Starting with tax year 2022, the IRS now offers a way for many investment clubs to eliminate or reduce Schedule K-2 and K-3 from your club tax filing. It is called the Domestic Filing Exception. It will save your club time and paper. Some clubs will NOT qualify for the exception and will still need to generate and file forms K-2 and K-3.

1. Club has no or limited passive foreign activity. ($0 - $300 of Foreign Taxes Paid)

2. All partners are US citizens or resident aliens.

3. Your club must notify partners in writing by the filing date of the club partnership return, March 15, stating that the partner must request a Schedule K-3 if the partner requires one. Note: bivio will generate this notice with the member's K-1.

4. No partner requests a Schedule K-3 on or before February 15.

   Timing of the notifications in items 3 and 4 may be extended if the club files for an extension

If your club meets these criteria, then the club meets the Domestic Filing Exception. This means:

• Your club does NOT need to prepare and file Schedule K-2 or K-3 with the IRS.

• Your club does NOT need to give partners a Schedule K-3 document.

If you use bivio software to complete your club taxes, your answers in the bivio tax interview will determine if your club meets the Domestic Filing Exception. bivio's software will generate the proper notification to partners as an attachment to each partner's K-1.

More questions? Email club specific questions to: support@bivio.com