The IRS today posted a set of questions and answers (referred to as “FAQs”) concerning issues relating to section 965 filing and reporting requirements for 2018 tax returns.
These FAQs (Questions and Answers about Tax Year 2018 Reporting and Payments Arising under Section 965, posted December 12, 2018) provide answers to questions related to tax year 2018 return filing and payment obligations arising under section 965—including reporting and payment obligations resulting from amounts included in income for the 2017 tax year. The IRS explained that a prior version of FAQs provide answers to questions regarding tax year 2017 return filing and payment obligations arising under section 965.
The new tax law (Pub. L. No. 115-97, enacted December 22, 2017) added section 965 to the Code. Section 965 generally requires “United States shareholders” to pay a transition tax on the untaxed foreign earnings of certain specified foreign corporations as if those earnings had been repatriated to the United States.
The IRS in March 2018 originally released the FAQs to be used by taxpayers in filing 2017 tax returns that report amounts under section 965 and paying the tax required by section 965. Read TaxNewsFlash
Subsequently, the IRS updated the FAQs about reporting related to section 965 on 2017 tax returns. Read TaxNewsFlash and TaxNewsFlash
Among the FAQs in today’s release are items addressing the following issues:
The IRS has provided three examples illustrating the principles of these FAQs.
The IRS timely issued these FAQs on issues related to the payment and reporting of obligations arising under section 965 for the 2018 tax year, thereby affording taxpayers sufficient time to consider the implications of section 965 with respect to payments, including estimated tax payments, for their 2018 tax year.
These FAQs include clarifications and updates to the procedures for making tax year 2017 section 965(h) installment payments due in 2018, and for making tax year 2018 section 965(h) net tax liability payments (either in installments or in full).
Taxpayers will want to take these FAQs and their effects into account when reviewing and calculating tax year 2018 and 2019 estimated tax payments.
Taxpayers with a section 965 inclusion will also want to determine that first quarter 2019 tax payments are made separately, specifically dedicated to tax year 2019.
Payments for first quarter 2019 included with 2018 estimated tax payments or paid with a Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns, pursuant to the FAQs, will be applied to a taxpayer’s section 965(h) future installments and not to tax year 2019 estimated tax.
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