On June 4, the U.S. Internal Revenue Service (IRS) revised their Questions and Answers about Reporting Related to Section 965 on 2017 Tax Returns, a list of Frequently Asked Questions (FAQs) and answers on IRS.gov designed to provide further guidance on how taxpayers should report and pay the section 965 transition tax on 2017 returns. An overview of the FAQs with key takeaways can be found here. The June revisions added questions 16, 17, and 18. Collectively these additions provide relief to certain taxpayers that may not have properly paid or filed their first transition tax payment. Specifically the new FAQs provide for the following:
- Question 15 gives all taxpayers that were unaware of guidance issued on April 13 relief from underpayment penalties from their Q1 2018 estimated tax installment if they pay their underpayment prior to the due date of their next quarterly installment.
- Question 16 provides certain individuals, not corporations, additional time to make their first transition tax installment payment, without accelerating subsequent installments. Eligible individual taxpayers are those with a section 965 transition tax liability less than $1 million.
- Question 17 provides individuals, not corporations, additional time to make an election under section 965(h) to pay their transition tax in installments so long as they have already filed their tax return. Eligible individual taxpayers are instructed to file an amended return by the due date of their return had they requested an extension. The IRS will treat such individuals as if they had requested and received the extension.
The Tax Cuts and Jobs Act (TCJA) enacted the transition tax and a variety of other international tax provisions. We expect Treasury to issue further guidance on these and other important matters arising under the TCJA, so taxpayers should pay close attention to the IRS website.
