The IRS issued IR-2018-53 on March 13, 2018 addressing certain questions and answers (Q&A) regarding reporting requirements and election procedures relating to the newly enacted mandatory deemed repatriation of deferred foreign earnings (the ‘toll tax’). The Q&A addresses specific questions about who must report amounts related to the toll tax, the form of the reporting, and when certain related elections must be filed, following the introduction of the new territorial tax regime under the 2017 tax reform reconciliation act, also known as the ‘Tax Cuts and Jobs Act’ (the Act). Of immediate concern, calendar-year taxpayers electing to pay their toll tax liability in annual installments under Section 965(h) must make such payment by the unextended due date of their inclusion year tax return, due on April 17, 2018. The IRS will provide additional guidance and other information on IRS.gov in the weeks ahead.
The Q&A is the latest guidance issued by the IRS related to reporting, paying and filing elections related to the toll tax.
Taxpayers should immediately review the Q&A prior to submitting the IRC 965 Transition Tax Statement to the IRS in order to make timely toll tax liability payments and comply with the filing requirements for making available elections under Section 965. Importantly, taxpayers should take note of the general requirement to file a Form 5471 with respect to each specified foreign corporation with respect to which the taxpayer is a US shareholder. Taxpayers that have already filed their 2017 tax returns should consider filing an amended return consistent with the guidance provided in IR 2018-53 to avoid potential processing difficulties and erroneous notices being issued by the IRS.
Partner, Washington National Tax Services ITS Leader, PwC US