US Cross-Border Tax Blog

Published by W.L. Dueck LLP

Steven Flynn

US Transition Tax – Update

On March 13th, the Internal Revenue Service provided further guidance on how US taxpayers should report activity subject to the US Transition Tax on their 2017 US income tax returns.  Our previous blog describing the tax and its impact to US taxpayers can be found HERE.

This IRS guidance references earlier IRS updates and provides instruction on how to complete US federal income tax returns, file elections and make US federal income tax payments.  Full details of the IRS’s guidance can be found at the link below.  We note the following:

  • The IRS released a statement to be included with a US person’s tax return who has an income inclusion due to the Transition Tax.  Required to be signed under penalties of perjury, the statement asks for the person’s total income, aggregate cash position in the non-US corporation, deduction amount, deemed paid foreign taxes and net liability. The statement also asks which elections were made;  https://www.irs.gov/pub/irs-news/Appendix%20-QA3_IRC-965-Transition-Tax-Statement_Fillable.pdf
  • The guidance instructs taxpayers on how to make elections to defer payment over eight years and use alternative methods to calculate US Earnings and Profits. Other elections are available;
  • The guidance instructs taxpayers to make two payments with their 2017 US tax returns if required: one payment to represent regular US federal income tax and a second payment specifically for the Transition Tax;
  • The guidance asks taxpayers to delay electronically filing their US federal form 1040 until on or after April 2, 2018 so that the IRS can make certain systems changes to allow returns to be accepted and processed.

Much more information can be found here:  https://www.irs.gov/newsroom/questions-and-answers-about-reporting-related-to-section-965-on-2017-tax-returns

US individual taxpayers impacted by these rules have until April 17, 2018 to make certain elections and pay the first installment of their Transition Tax.  This deadline exists for all US individual taxpayers regardless of whether they file for an extension or whether they receive an automatic extension to June 15th by being a taxpayer abroad from the US.

Contact W.L. Dueck & Co. LLP to determine strategies and alternatives available to you by calling 1-855-448-0200.