According to Law360, although taxpayers have already calculated and reported their Section 965 deemed repatriation tax, Section 965 will have a continuing impact.
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Taxpayers are well advised to review their approach to estimated taxes. The IRS refuses to issue refunds of overpaid income taxes to taxpayers who elected to pay Section 965 taxes in annual installments, effectively penalizing taxpayers who conservatively overpay estimated taxes. and
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The IRS plans extensive enforcement efforts. A recent U.S. Treasury Inspector General for Tax Administration report highlights these issues, including recommendations for the IRS concerning the IRS enforcement plan.
Both TIGTA and the IRS believe these figures may be understated. The IRS said the numbers will likely change significantly because the IRS had not yet processed all the returns filed with extensions in October 2018. The lower than expected Section 965 revenue may trigger enhanced compliance efforts by the IRS.
- A strategy to identify taxpayers that did not properly comply with Section 965;
- An assessment of the benefit of issuing notices to those taxpayers that may be subject to Section 965 filing requirements;
- Procedures to monitor taxpayers that elected to defer the tax;
- Validation of Section 965 data reported by the taxpayer; and
- Steps to ensure that taxpayers did not violate anti-abuse rules.
TIGTA also suggested that the IRS use Form 5471, Information Return of U.S. Person With Respect to Certain Foreign Corporations, to identify taxpayers who should have reported the Section 965 tax but did not.
Based on the number of returns filed with Forms 5471, TIGTA estimates that more than 51,000 filers may be subject to the Section 965 tax, which is significantly more than the approximately 31,000 filers (61%) who reported the Section 965 tax.
Read more at: Tax Times blog
