U.S. Transition Tax – A Fourth Update

April 14 2018

In mid-April, there is usually a race against time by taxpayers and accountants to meet U.S. tax filing deadlines. The normal U.S. tax filing deadline for the 2017 year for individuals and certain U.S. entities is Tuesday, April 17th (a few days later than the usual April 15th due to weekends and a U.S. holiday on Monday).  Entering the “race against time” this year is the Internal Revenue Service itself, who on Friday April 13th published more guidance on the U.S. Transition Tax, a mere four days before the filing deadline.  The IRS has been very active this winter and spring providing updates and guidance for the U.S. Transition Tax enacted by the Tax Cuts and Jobs Act in December.  Links to our blog entries on the previous updates are at the end of this blog.

On Friday’s release, the IRS updated its list of frequently asked questions.  The IRS confirmed that they will apply 2017 year estimated payments first to a taxpayer’s regular 2017 net income tax liability on regular, non-Transition Tax income and then any remainder would be applied to the taxpayer’s Transition Tax liability.  The IRS also confirmed that the taxpayer cannot apply any refund from the 2017 year to 2018’s estimated tax requirements without first paying the U.S. Transition tax liability (either 100% of the amount, or the first instalment due if so elected).  Taxpayers should be careful when estimating and paying their U.S. tax liabilities this week to ensure all three payments are made: 1) 2017 U.S. regular income tax liability 2) First quarter estimated tax payment for 2018 and 3) U.S. Transition Tax (either in full or first instalment).

Further detail on the IRS’ FAQ regarding Transition Tax can be found here:

https://www.irs.gov/newsroom/questions-and-answers-about-reporting-related-to-section-965-on-2017-tax-returns

Please contact us at 1-855-448-0200 if you require assistance on U.S. Transition Tax or any US / Canadian cross-border tax matter.

Past U.S. Transition Tax blog entries:

Feburary 27, 2018:  https://wldtax.com/us-transition-tax/  

March 14, 2018:  https://wldtax.com/us-transition-tax-update/

April 3, 2018:  https://wldtax.com/us-transition-tax-next-update/