When tax reform was passed last December, the new legislation included a requirement for certain individuals with an interest in a foreign corporation to calculate and report a Repatriation Tax on their 2017 tax returns.  This tax (or the initial installment payment) was due by April 18, 2018, with no extensions.  (Please see our previous article, blog, and alert for further background on the tax and requirements.)

On June 4, 2018, the Internal Revenue Service (IRS) announced that, subject to certain conditions, it will waive late payment penalties and allow late installment payment election relief related to the Internal Revenue Code (IRC) §965 Repatriation Tax.

Who does this amnesty apply to?

It applies to the following situations:

  1. Taxpayers who improperly attempted to apply a 2017 overpayment of the Repatriation Tax to their 2018 estimated tax. These taxpayers will not be subject to the estimated tax penalty. 
    1. How to obtain the relief?
      1. To access this relief, all estimated tax payments must have been made by June 15, 2018. If you missed this deadline, we recommend that you make all estimated tax payments as soon as possible.
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  2. Taxpayers living inside the United States who missed the April 18, 2018 deadline for making the first of eight installment payments for the Repatriation Tax under IRC §965(h). These taxpayers will not be subject to a late payment penalty and will be allowed to access the installment payment plan under IRC §965(h).  NOTE: interest will still be due on the tax that should have been paid in the first installment payment.
    1. How to obtain the relief?
      1. Step 1 – Calculate the Repatriation Tax. If the total Repatriation Tax is less than $1,000,000, then go to Step 2.  If the total Repatriation Tax is more than $1,000,000, then you do not qualify for relief and must seek a different IRS amnesty program to make the correction.
      2. Step 2 – Make the first installment payment on or before April 15, 2019.[hr style=”1,2,3,4″ margin=”40px 0px 40px 0px”]
  3. Individual taxpayers who have already filed their 2017 tax return without electing to pay the Repatriation Tax under the installment plan. The election can be cured retroactively.
    1. How to obtain relief?
      1. The taxpayer must paper file an amended tax return (Form 1040X), along with the proper forms electing the installment plan on or before October 15, 2018.
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Our view is that the terms of this current amnesty are quite favorable.  After the timelines have passed on situations # 2 and # 3, we anticipate that any future amnesty programs related to the Repatriation Tax will not have terms as favorable.  We strongly urge taxpayers who have these issues to take advantage of this guidance as soon as possible.

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The Wolf Group, PC has assisted many individuals, partnerships, and corporations with the calculation of the Repatriation Tax and the election for the installment payment plan.  Please contact us at (703) 502-9500 with any questions or to set up a consultation.

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This material is for informational purposes only and does not constitute tax or legal advice. Please consult your own tax or legal advisor before engaging in any transaction.