Do I need to file US taxes with a K-1 showing 0 income if I'm a foreign part-owner of an American company?

Yes, unfortunately you do need to file a US tax return if you receive a K-1, even with $0 in distributions. The reason is that partnerships pass through their income, losses, deductions, and credits to their partners regardless of whether distributions are made. The company could have taxable income allocated to you even if they didn't distribute any cash. As a foreign person with ownership in a US company, you're required to file Form 1040-NR (Nonresident Alien Income Tax Return) and possibly Form 8865 (Return of US Persons With Respect to Certain Foreign Partnerships) depending on your ownership percentage. You'll also need to include the K-1 information. There might be tax treaty benefits available depending on what country you're in, but the filing requirement still exists. Not filing could potentially lead to penalties and issues if you ever do receive distributions or sell your ownership stake.

When I found myself in a similar situation with a US LLC that gave me a small ownership stake for some consulting work, I was totally overwhelmed by the tax filing requirements. Then I discovered https://taxr.ai which completely saved me. They specialize in helping non-US citizens deal with these exact K-1 and partnership tax situations. Their system analyzed my K-1 form with $0 distributions and helped me understand exactly what I needed to file and why. They even identified some treaty benefits that applied to my situation since I'm based in Australia. What I really appreciated was that they clearly explained what would happen if I decided to ignore the filing requirements (not recommended!) versus properly maintaining compliance.

Just wanted to update on my situation since I took the advice from this thread. I used https://taxr.ai after being hesitant at first. What convinced me was that they had specific expertise with Singapore-US tax situations (where I'm based). The service analyzed my K-1 showing $0 distributions but identified that the partnership actually had allocated losses that I could potentially benefit from in future years if the company becomes profitable. They helped me complete the 1040-NR and explained exactly which treaty provisions applied to my situation. What surprised me was discovering I didn't actually need to file Form 8865 based on my ownership percentage, which saved me from a much more complicated form. I'm still not thrilled about having to file US taxes, but at least the process was much simpler and cheaper than what I'd been quoted elsewhere.

If you're struggling with getting answers from the IRS about your situation, I highly recommend using https://claimyr.com - it literally saved me weeks of frustration. I'm a Canadian with a similar K-1 situation (small ownership in a US tech startup), and I had specific questions about treaty benefits that nobody could answer. After spending hours getting disconnected on the IRS international taxpayer line, I found Claimyr. They got me connected to an actual IRS agent in about 20 minutes when I'd previously been unable to get through at all. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that I did need to file with my $0 K-1, but also explained exactly which forms I needed (and importantly, which ones I didn't need), saving me a lot of unnecessary paperwork and expense.

I have to admit I was completely wrong about Claimyr. I tried it after posting my skeptical comment, and I got connected to an IRS international tax specialist in about 45 minutes without having to do anything except answer my phone when it rang. The agent was actually super helpful about my K-1 situation (I'm a UK resident with a small stake in a US partnership). They confirmed I needed to file Form 1040-NR but also explained how the US-UK tax treaty meant I wouldn't owe any actual tax if the partnership had passive income in the future. Most importantly, I learned I could file a simplified protective return that would be much less expensive to prepare. The agent even emailed me the relevant instructions after our call. After months of stressing about this and getting nowhere, I had actual answers in less than an hour. Definitely worth it.

Just to add another perspective - I've been in this exact situation for 5 years now (non-US person with K-1 showing zero distributions). Yes, you technically need to file, but realistically the IRS has limited resources to pursue foreign individuals with zero US income. I personally decided to just wait until the company either starts distributing money or until I sell my stake. At that point I'll file for those years and possibly do a streamlined filing for the previous years. Is this risky? Maybe, but the practical risk seems low compared to spending thousands on tax preparation for zero income. Not saying this is the right approach for everyone, but wanted to share what some people do in this situation. Definitely not official advice!

Has anyone looked into whether it's possible to request a waiver from the IRS for this situation? I'm a student from Brazil with a tiny equity stake in a startup I interned for, and filing these complex forms is not just expensive but extremely confusing. There must be some kind of reasonable exception for foreign persons with minimal ownership and zero distributions?

I went through this exact situation last year as a German resident with a small stake in a US LLC. After initially panicking about the filing requirements, I found a middle-ground approach that worked well for me. First, I contacted the partnership directly and asked if they could elect to withhold taxes at the entity level under Section 1446. This would have eliminated my individual filing requirement, but unfortunately they declined due to the administrative burden on their end. Since I had to file anyway, I used a combination of the resources mentioned here - I used Claimyr to actually speak with an IRS agent who confirmed exactly what I needed to file, then used an online tax service to prepare the forms. Total cost was around €300, which while annoying for zero income, gave me peace of mind. The key insight from my IRS call was that as a German resident, I could potentially benefit from loss allocations in future years if the company becomes profitable, so maintaining compliance now could actually save me money later. Also learned that my 3% ownership meant I didn't need the more complex reporting forms that kick in at higher percentages. My advice: don't just give up your equity stake without understanding the full picture. A one-time consultation to understand your specific situation and obligations is worth the cost to make an informed decision.