Out of Scope:
- All except Interest, Dividends, Capital Gains, Royalties and associated Foreign Tax Credits.
- Royalties with expenses
- Form 8865 (Foreign Partnerships)
Make sure that the K-1 is not associated with the client’s IRA! That would not go on their individual tax return.
Also, check the K-1 tax year period – it may not be Jan-to-Dec!
Tax Slayer entry:
Federal Section > Income > Other Income > K1 Earnings
- Verify that all items are in scope based on the type of K-1 (see the samples above).
- Entries carry across to the appropriate tax forms and schedules.
- If a royalty is included, you will be prompted to create a Schedule E for it.
Entries with letter codes
Many foreign transaction letter code entries are required if foreign tax paid exceeds the $300/$600 limit which then requires Form 1116. As long as the Form 1116 is not required, these codes DO NOT put the Form K-1 out of scope.