US & Foreign Partners with US & Foreign Partnerships

Potential new client with a foreign component. I want to make sure I am not missing any potential filings. Any advice or recommendations are appreciated.

There are two partnerships:
-Partnership #1 - U.S. based, formed in Florida
-Partnership #2 -Formed and based in Greece.

There are three partners. Each partner owns 33% of both partnerships
-Partner #1 - US citizen living in the US
-Partner #2 - US Citizen living in Greece
-Partner #3 - Greek citizen living in Greece

They have an accountant in Greece that takes care of the Greek filing requirements. They are looking for a US based CPA for everything else.

For Partnership #1
-Standard US 1065 Tax Return
-Form 8804 & 8805 for the income allocated to the foreign partner
-Form 8813 to make the payment for the foreign partner
-I do not believe 1042 is required for the foreign partner as it is for income paid to foreign partners. The 8804/8805 takes care of that, but I am trying to confirm this fact

For Partnership #2
-No U.S. filings are far as I can tell, because all of the income generated by the foreign partnership is generated outside of the U.S. However, will need to file 8865 as noted below

For the partners
-Partner #1 - US citizen living in the US
-1040
-Included with the 1040 would be form 8865, because the two US citizens own more than 50% of the partnership
-Potential FBAR filings is there are foreign accounts in US citizen's name
-Potential foreign tax credit for taxes paid in Greece

-Partner #2 - US citizen living in Greece
-Same as partner #1, except the additional need to include any income generated in the foreign country, while living in that country
-As was stated above, they have an accountant in Greece preparing all required returns for that country

-Partner #3 - Greek citizen living in Greece
-File for ITIN
-1040NR, including 8865, and 8805

Appreciate any advice, especially if you think I am missing some facts that could affect the filing requirements.

Excellent summary. The first question is what the default US entity classification might be for the Greek entity. Assuming it is a partnership, I would get the ITIN application made as early as possible.

I can see we don't know for the #1 entity the extent to which there may be ECI. The US citizen living in Greece may not be current. If so, I'd be talking about the SFOP before acting. For the #1 entity, US estate tax might want to be considered.

Look into the repeal of Grecian Magnecite,Sections 864(c) and 1446(f); getting foreign partner out of USP will be a problem.

Excellent summary. The first question is what the default US entity classification might be for the Greek entity. Assuming it is a partnership, I would get the ITIN application made as early as possible.

I can see we don't know for the #1 entity the extent to which there may be ECI. The US citizen living in Greece may not be current. If so, I'd be talking about the SFOP before acting. For the #1 entity, US estate tax might want to be considered.

Thanks Guya. I try to do the research myself, and come here either for verification of my findings, or if it is just something I'm not sure about.

Appreciate the additional info, I will bring these up with the potential client.

Hey, ThatTaxGuy (and anyone else who might have insight on this):

I also last year got a new partnership with a foreign partner, and we completed his W-7 ITIN application in August 2020.

The IRS still has not processed the ITIN application. The client has been calling the IRS for weeks, with no answer.

Has your client gotten the ITIN yet? Any suggestions on how to get a hold of the IRS for this? Does anyone know how long the IRS is taking to process W-7's nowadays?

On the assumption you are a CAA, you could be phoning the ITIN Unit at this stage.

No, unfortunately, not a CAA. We do maybe 1 W-7 per year, usually without any problems, and we're not looking to doing any more than what we're doing, so it's not enough to justify becoming a CAA.

I'm not sure if my client isn't persevering on hold long enough or what. Unfortunately, he's not local, he's in China.

I know the IRS is taking 11-12 months to process amended income tax returns now, when it usually takes 3 months.

The W-7 instructions say that it usually takes 7 weeks to process a Form W-7, but it's been 10 months for my client (and also ThatTaxGuy's client). I couldn't find anywhere on the internet where people were saying how long the IRS is typically taking on that now.

So the foreign partner still has not receive the ITIN after a year, and now it's time to file the 1040-NR. I'm thinking that we need to attach the W-7 to the 1040-NR, as if we hadn't previously applied for an ITIN, just like a normal (non-partner) ITIN application.

Any thoughts on this? Does anyone know how the IRS is processing W-7's attached to tax returns nowadays?