What happens if you didn't pay the transition tax under 965(e)?

The Internal Revenue Service (IRS) recently provided guidance on the application of section 965(e) of the Code. This section applies specifically to those who receive income from “certain specified foreign corporations.” The law basically requires a transition tax on foreign earnings.

Who must pay this tax? The IRS requires United States shareholders as well as both direct and indirect partners of deferred foreign income corporations pay a transition tax on income from these corporations.

How was this tax reported? The agency required the report of such income within the 2017 tax return. This included the need to also file an IRC 965 Transition Tax Statement. This form included various information such as the taxpayer’s aggregate foreign cash earnings and deductions as well as any foreign taxes already paid.

What if the deadline was missed? Those who neglected to report this information on their 2017 tax returns have two options:

  • File an amended tax return. An individual or business can file an amended tax return for the 2017 tax year with the IRs. Taxpayers generally can file this amended form until October 14, 2018.
  • Low liability. The IRS recently stated that it will likely waive the late-penalty payment for individuals’ with a total transition tax liability that equals less than $1 million who pay the tax in full by April 15, 2019.

A failure to comply with tax obligations in this matter can result in late-payment penalties as well as additional monetary fees and, depending on the details surrounding the failure to comply, potential imprisonment. Additional options for compliance may be available.

Prompt action can reduce these risks. An attorney experienced in international tax law matters can guide you through the process and mitigate the risk of penalties and criminal charges.

No Comments

Leave a comment
Comment Information
Email Our Team

Contact Us to Get Started Today

Located in the Washington, D.C area, we serve clients in the District of Columbia, Maryland and Northern Virginia, as well as across the country and overseas. For a free initial consultation, call 202-381-1261 or complete our brief online form.

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy

Six Convenient Office Locations in and around the DC Metropolitan Area

Washington, D.C.
1050 Connecticut Ave NW #500
Washington, D.C. 20036

Phone: 202-618-1873
Fax: 888-235-8405
Washington Law Office Map

Columbia Office
10440 Little Patuxent Parkway, Suite 300
Columbia, MD 21044

Phone: 202-618-1873
Phone: 410-497-5947
Fax: 888-235-8405
Columbia Law Office Map

Annapolis Office
839 Bestgate Road
Suite 400
Annapolis, MD 21401

Phone: 202-618-1873
Phone: 410-497-5947
Fax: 888-235-8405
Annapolis Law Office Map

Fairfax Office
8280 Willow Oaks Corporate Drive
Suite 600
Fairfax, VA 22031

Phone: 202-618-1873
Phone: 703-988-4817
Fax: 888-235-8405
Fairfax Law Office Map

Rockville Office
199 E. Montgomery Avenue
Suite 100
Rockville, MD 20850

Phone: 202-618-1873
Phone: 240-599-5009
Fax: 888-235-8405
Rockville Law Office Map

Baltimore Office
400 East Pratt Street
8th Floor
Baltimore, MD 21202

Phone: 202-618-1873
Phone: 443-743-3381
Fax: 888-235-8405
Baltimore Law Office Map