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IRS Auditors Set to Audit Companies that Owe Repatriation Tax

The Internal Revenue Service said on November 4, 2019 that it would begin examinations of U.S.-based multinational companies’ 2017 and 2018 returns to ensure they comply with the repatriation tax provision of the tax overhaul enacted two years ago.

To promote compliance with Internal Revenue Code Section 965 , the IRS said it would start scrutinizing affected multinationals’ returns as part of its campaign announced in July 2018 on that facet of the Tax Cuts and Jobs Act .

The agency said its focus will start with examining 2017 returns and “generally require” looking at companies’ 2017 and 2018 filings. In addition to examinations, the campaign will provide technical assistance to IRS teams working on Section 965 matters, with a focus on identifying and addressing taxpayer populations with potential material compliance risk, according to the agency’s announcement.

The agency also said the audit could expand beyond reviewing taxes paid on offshore profits, it could trigger an examination of other changes companies made to their tax strategies after the 2017 law, which cut the corporate rate to 21% and overhauled the international tax rules.

“It is anticipated that returns selected as part of the 965 campaign will also be risked and, if appropriate,
examined for other material issues,
especially issues related to”
corporate planning
in response to the tax law,
the IRS said on its website, referring to the code section 965.

Affected companies were given the option of paying the tax interest-free over eight years, though as November 4, 2019's notice said, the “vast majority” of Section 965 liability has been expected to arise on corporate returns for 2017 and 2018.

The LB&I division currently has 53 active compliance campaigns listed on the IRS website.

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Read more at: Tax Times blog

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