The IRS issued Rev. Proc. 2012-17, which contains rules partnerships must follow to supply Schedules K-1, Partner’s Share of Income, Deductions, Credits, etc., electronically. The guidance was effective Feb. 13.
A person required to furnish Schedules K-1 to partners (furnisher) can do so in an electronic format, provided the recipient has affirmatively consented to receive it in an electronic format and demonstrated that he or she can access the document in the electronic format in which it will be furnished.
If a furnisher changes its hardware or software and the change creates a material risk that the recipient will not be able to access the Schedule K-1, the furnisher must notify the recipient before it changes the hardware or software. The furnisher must explain that a new consent is required in the new electronic format to establish that the recipient is able to access the Schedule K-1 in that format.
Furnisher’s required disclosures. Before or at the same time as the furnisher obtains the recipient’s consent, the furnisher must provide an electronic or paper disclosure with the following information:
- That the Schedule K-1 will be provided on paper if the recipient does not consent to electronic delivery.
- The duration of the consent—whether the consent will apply to future Schedules K-1 until the consent is withdrawn or only to the Schedule K-1 that the recipient is consenting to receive currently.
- The procedure to be used in the future to request a paper statement, and whether the furnisher will treat such a request as a withdrawal of consent.
- The procedures for withdrawing consent, including contact information and the furnisher’s confirmation of the withdrawal and its effective date.
- The conditions in which the furnisher will cease providing electronic statements (such as withdrawal from the partnership).
- The procedures for updating a recipient’s contact information and that the furnisher will notify recipients of any change in the furnisher’s contact information.
- A description of the hardware and software needed to access, print, and retain the Schedule K-1, the date after which the schedule will be unavailable on the website, and the information that the recipient may need to attach copies to federal, state, or local income tax returns.
Notice that Schedule K-1 is available. If the Schedule K-1 is posted on a website, the furnisher must notify the recipient by mail, email, or in person. The notice must explain how to access and print the Schedule K-1 and contain a specified subject line heading if sent by email. If the notice is sent electronically and returned as undeliverable and the furnisher cannot obtain a corrected address, the furnisher must provide a Schedule K-1 by mail or in person within 30 calendar days after the electronic notice is returned.
An original or amended Schedule K-1 must be retained on the website until the later of 12 months after the end of the partnership’s tax year or six months after the form is issued.