Strategizing International Tax Best Practices – by Keith Brockman

IRS recently updated its previously published Q and A’s re: application of Sec. 965 deemed repatriation tax instructions re: estimated tax payments for 2018.  The prior version still has a debatable Question 14 that applied a 2017 overpayment to the entire amount of deemed repatriation tax (not just the first installment) prior to application for the first estimated payment of federal income tax generally due April 15th.

As Question 14 was issued literally just prior to the first installment date, corporations may have missed this point and thereby would be subject to interest and penalty for late payment.

The latest update obviates such penalties if the second estimated payment is a cumulative catch-up amount for both the first and second estimates.  

However, what was not fixed is the apparent ability by IRS to apply the overpayment solely to deemed repatriation tax in its entirety prior to applying it to estimated federal income tax liability due.  This is still a question in the minds of many.  

EY’s Global Tax Alert highlights this development.

https://www.ey.com/Publication/vwLUAssets/US_IRS_updates_Section_965_transition_tax_FAQs_to_include_late-payment_penalty_and_filing_relief_-_action_may_be_needed_by_15_June_2018/$FILE/2018G_03498-181Gbl_US%20IRS%20updates%20Section%20965%20transition%20tax%20FAQs.pdf

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