Updated FAQs Issued on Filing 2017 Tax Returns Including Transition Tax (FAQs)

The IRS has provided updated answers to frequently asked questions (FAQs) about filing 2017 returns and making tax payments relating to the transition tax under Code Sec. 965. The instructions in the FAQs cover filing 2017 tax returns with an amount required by Code Sec. 965.


Generally, U.S. shareholders pay tax on the untaxed foreign earnings of certain specified foreign corporations as if those earnings had been repatriated to the United States. The effective tax rates that apply to such income are adjusted using a participation deduction. Moreover, a reduced foreign tax credit applies to the included income. Further, taxpayers may elect to pay the transition tax in installments over an eight-year period. Generally, a specified foreign corporation is either a controlled foreign corporation, or a foreign corporation that has a United States shareholder that is a domestic corporation.

Filing 2017 Tax Returns Including Transition Tax

The transition tax applies to certain specified foreign corporations’ last tax year beginning before January 1, 2018. Moreover, the specified foreign corporation’s income is includible in the U.S. shareholder’s income for the year in which, or with which, such a specified foreign corporation’s year ends. Therefore, U.S. taxpayers may need to pay tax on Code Sec. 965 income when filing their 2017 tax returns.

The updated FAQs cover what elections are available; making elections; reporting additional information to shareholders, partners and beneficiaries; how to pay the tax resulting from a Code Sec. 965 inclusion; making estimated payments; and refunds, among other subjects.

Further, a taxpayer who fails to submit a tax return according to the instructions may have their return rejected or experience processing delays, or erroneous notices being issued. Taxpayers with questions or comments related to Code Sec. 965 may submit those questions or comments to the IRS at LB&I.TCJA@irs.gov. Individual responses will not be provided. However, questions or comments may be addressed in the form of additional FAQs.

Questions and Answers about Reporting Related to Section 965 on 2017 Tax Returns


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