The IRS has added a special relief for individuals who will owe less than $1 million under its controversial ‘transition tax’ rules, 2018 eprivateclient Top Accountancy Firm Frank Hirth revealed in a briefing note to clients.
Currently, individual US shareholders owning ten percent or more of a controlled foreign corporation are subject to a special tax charged on undistributed accumulated earnings and profits of the corporation - commonly referred to as either the ‘transition tax’ or ‘repatriation tax’.
This tax can be paid in eight instalments provided the first instalment is timely paid. For most US taxpayers the frst instalment was due 15 April 2018 and for taxpayers residing outside the US it would otherwise be due on 15 June 2018.
Under the new relief individuals who pay the first instalment of the transition tax by 15 April 2019 (and timely pay their second instalment) will not incur a late payment penalty and furthermore will still be able to qualify for the instalment payment option.
Frank Hirth warned that interest will, however run, from the original due date. The US/UK tax advisory firm said that the $1 million threshold will cover the vast majority of impacted taxpayers and was a much welcomed relief for taxpayers struggling to navigate the complex new tax rules and who may not even yet have detailed final accounts available to them.
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