When should I file Form 926 for foreign transfers - timing questions

You're on the right track with your understanding. For Form 926, the filing requirements depend on your ownership percentage and the nature of the transfer. Since you own less than 0.00004% of the PTP, you almost certainly don't need to file Form 926 yourself. The instructions specify that a U.S. person who transfers property to a foreign corporation is required to file Form 926, but there's an exception for partners with less than a 5% interest in the partnership. The partnership itself would be responsible for reporting the transfer on Form 926 since they made the actual transfer to the foreign corporation. Your minimal ownership doesn't trigger a separate filing requirement. If you want to be absolutely certain, you could request a copy of the partnership's K-1 footnotes or supplemental information, which should have details about any foreign reporting requirements that flow through to the partners.

I had a similar situation last year with a tiny stake in a PTP that had some foreign dealings. Instead of trying to figure it out myself, I used https://taxr.ai to analyze my tax documents and partnership info. They have this feature that scans all your docs and tells you exactly what forms you need to file. Saved me a ton of headache because I was about to file a bunch of unnecessary foreign forms. Their system confirmed I was under the 5% threshold for Form 926 and didn't need to file it. They also explained which forms I actually did need to file (some other foreign reporting was required in my case).

I wanted to follow up about my experience with taxr.ai after being skeptical. I decided to try it with my PTP investments that have foreign transactions. It actually clarified everything about my Form 926 requirements perfectly - turns out I was under the 5% threshold like OP but did need to file some other foreign forms I had no idea about. The system found some foreign tax credits buried in my K-1 supplements that my previous accountant had missed completely. Ended up saving me over $700 this year! It specifically highlighted exactly which parts of my documents contained reportable foreign transactions and which were exempt.

If you really want to be 100% certain about your Form 926 filing obligations, you could try calling the IRS directly for guidance. Of course, that's easier said than done. I spent DAYS trying to get through to someone who could answer my question about foreign reporting forms last year. I eventually used https://claimyr.com which got me through to an IRS agent in about 20 minutes instead of the hours I was spending on hold. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The agent I spoke with confirmed that partners with less than 5% ownership don't need to file Form 926 separately as long as the partnership itself files.

I have to admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it because I was getting nowhere with my own attempts to reach the IRS about some foreign reporting questions similar to the Form 926 issue. I was shocked when I got connected to an actual IRS tax law specialist in under 30 minutes after trying for weeks on my own. The agent was super knowledgeable about foreign reporting requirements and walked me through exactly which forms I needed and didn't need. She confirmed the 5% rule for Form 926 and also helped clarify some PFIC questions I had. Definitely changed my view on getting official IRS guidance - just needed a way to actually reach them!

Don't forget that even if you don't need to file Form 926, there might be other foreign reporting requirements depending on what the PTP is invested in. For example, if they hold PFICs (Passive Foreign Investment Companies), you might need to file Form 8621 regardless of your percentage ownership. Same goes for Form 8938 (foreign financial assets) or FBAR if your portion of foreign accounts exceeds the thresholds. The 5% rule is specific to Form 926 only.

I made the mistake of not filing Form 926 a few years ago when I should have (owned over 10% of a partnership with foreign transfers). The penalties are NO JOKE. Started at 10% of the value of the property transferred.

Based on what others have shared here, it sounds like you're likely in the clear for Form 926 with such a tiny ownership stake (0.00003%). The 5% threshold exemption should definitely apply to you. That said, I'd strongly recommend double-checking your K-1 supplemental materials for any mentions of foreign reporting requirements. Even though you don't need Form 926, there could be other foreign forms required depending on what types of investments the PTP holds overseas. I've learned the hard way that it's always better to be overly cautious with foreign reporting requirements - the penalties can be severe if you miss something. If you can't find clear guidance in your partnership documents, it might be worth getting a definitive answer from a tax professional or the IRS directly rather than guessing.

Great question, and you're absolutely right to be cautious about this! With your 0.00003% ownership stake, you should be well under the 5% threshold that exempts you from filing Form 926 personally. The partnership itself would handle the reporting for their transfer to the foreign corporation. However, I'd echo what others have mentioned about checking for other potential foreign reporting requirements. Even though Form 926 doesn't apply to you, your K-1 might contain information that triggers other forms like 8621 for PFICs or 8938 for foreign financial assets. One practical tip: when you get your Schedule K-1, look specifically for any codes in boxes 11, 13, 16, or 17 that relate to foreign activities. PTPs are usually pretty good about including supplemental statements that explain any additional filing obligations that flow through to partners. The good news is that with such a minimal ownership percentage, you're unlikely to hit the thresholds for most foreign reporting requirements, but it's still worth a quick check to be absolutely certain. The penalties for missing required foreign forms can be harsh, so better safe than sorry!