Pursuant to the regulations, in order to electronically issue a schedule K-1 to any partners:
- The partnership must furnish a set of prescribed disclosures to the partner (see detail below).
- The partnership must obtain and document the partner’s consent to receive an electronic K-1.
Any partner not consenting to receive the schedule K-1 electronically must be provided with a paper form.
As part of the consent procedures, the partnership must disclose to the partners the following information:
- The instructions on how to access, print, and retain the schedule K-1, including the software and hardware requirements.
- The date or time period after which the electronic K-1 will no longer be accessible to the recipient.
- That the K-1 will be furnished on paper if the recipient does not consent to receive it electronically.
- That their consent will apply to all future K-1s until the consent has been withdrawn.
- The instructions on how to request a paper copy of the form after consenting to electronic delivery, and whether such a request will be treated as a withdrawal of consent.
- That the consent may be withdrawn in writing (electronically or on paper).
- The contact information of the person to whom they may address their withdrawal of consent.
- That the partnership will confirm in writing (either electronically or on paper) that the consent has been withdrawn and the date on which that withdrawal takes effect.
- That a withdrawal of consent does not apply to a form that was properly furnished electronically prior to the effective date of the withdrawal consent.
- The procedures for the recipient to update their contact information.
- That the recipient may be required to print the K-1 and attach it to the income tax return.
A new consent and disclosures are required if there is a change in the software or hardware required to access the K-1. In addition, if the K-1 is posted on a website for retrieval by the partner, the partnership must notify the partner in writing when the K-1 is available, either by mail, electronic mail or in person. Such notice must include instructions on how to access and print the statement. If the notice is provided by electronic mail, the notice must include the following in capital letters, “IMPORTANT TAX RETURN DOCUMENT AVAILABLE” on the subject line of the electronic mail.
Please contact us if you have any questions regarding these requirements.