The IRS updated IR-2018-53 on June 4, 2018, releasing new questions and answers (Q&A) regarding certain requirements related to the newly enacted mandatory deemed repatriation of deferred foreign earnings (the ‘toll tax’) under amended Section 965. Initially released on March 13, the Q&A addressed specific questions about who must report amounts related to the toll tax, the form of reporting, and the timing for filing certain elections following the introduction of the new territorial tax regime under the 2017 tax reform reconciliation act.
Of particular interest, the updated Q&A addresses penalty relief following a potential underpayment of 2018 estimated taxes resulting from the toll tax liability. For calendar year taxpayers, if their first installment of estimated taxes for 2018 is underpaid due to the Section 965(h) installment payment, they have until June 15, 2018 to pay and avoid an underpayment penalty for such estimated taxes.
The updated Q&A is the latest guidance issued by the IRS related to penalties following a potential underpayment of 2018 estimated taxes. Taxpayers with a potential underpayment of their first 2018 estimated tax installment should immediately review the updated Q&A and consider application of such penalty relief in the immediate future (e.g., on or before June 15, 2018 for calendar year taxpayers).