Background on Form 1065 E-Filing
The IRS has changed its XML (Extensible Markup Language) Schema for electronically filed partnership tax returns with non-U.S. partners.
Partnerships must file an annual Form 1065 (US Return of Partnership Income) to report their income, expenses, credits, and other partnership tax items.
Many partnerships have non-U.S. partners. These are partners that do not have a social security number (SSN), employer identification number (EIN), or other form of a U.S. taxpayer identification number (TIN).
To prepare the Schedule K-1 (Form 1065) for each partner, a taxpayer ID must be disclosed. However, if the partner was a non-U.S. person with no U.S. TIN, the partnership could use “FOREIGNUS” as the placeholder. Using FOREIGNUS was acceptable for e-filing purposes.
Changes Made by the IRS in March 2024
On March 21, 2024, the IRS updated its Partnership FAQ with a note regarding FOREIGNUS usage for e-filing Form 1065 tax returns. The update indicated the XML Schema was modified to no longer accept FOREIGNUS as a placeholder for partners that do not have a U.S. TIN.
Instead, partnerships should start using all zeroes as placeholders for a foreign individual or entity that does not have a valid U.S. TIN.
For example, if the partner is an entity, it should use the following all-zero format, which is consistent with a 9 digit EIN:
00-0000000
If the partner is a natural person, it should use the following all-zero format consistent with an SSN or ITIN:
000-00-0000
The IRS notice affirms that this change in e-filing policy for the XML Schema should not be interpreted by partners, partnerships, and their tax preparers as a policy that partners who were not previously required to obtain an SSN or TIN are now required to do so.
Partnerships and their owners can find more information by visiting the following IRS link below:
What Can Be Entered in Schedule K-1 and K-3 In Place of FOREIGNUS
