AICPA wants IRS to change guidance on corporate tax overpayments

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The American Institute of CPAs is asking the Internal Revenue Service to amend the information it is providing to taxpayers in its Frequently Asked Questions pages about overpayments of taxes by multinational corporations on their 2017 tax returns under the new tax law.

Even though that section of the tax code, known as Section 965, mainly relates to the treatment of deferred foreign income and aims to encourage multinationals to repatriate the profits they have been holding abroad, the AICPA argues the IRS guidance in the FAQs could have a “detrimental impact on all affected taxpayers, including individuals, small businesses and large corporations.” Many corporations are confused about that section of the Tax Cuts and Jobs Act, and the IRS has been issuing guidance, in some cases in the form of FAQ pages on its website.

The IRS posted the updated FAQs for Section 965 on its website last week. In a letter Thursday, AICPA Tax Executive Committee chair Annette Nellen asked IRS officials to give taxpayers more choices. “The AICPA urges the IRS to amend Q&A 13 and Q&A 14 to provide taxpayers the ability to direct the application of any overpayment resulting from their combined 2017 estimated taxes, 2017 extension payments and amounts paid specifically to satisfy the initial section 965(h) installment,” she wrote. “We believe that allowing taxpayers a choice in how their tax payments are applied is consistent with the 8-year installment payment period enacted as part of code section 965(h) and necessary for the fair and sound administration of the tax system.”

Earlier this month, in a separate letter to the IRS, the AICPA asked the IRS to clarify the treatment of some types of overpayments and suggested it permit taxpayers to receive a refund or to elect the application of an overpayment of their initial section 965(h) installment to one or more of the following:

• second installment payment of the section 965 tax liability due in April 2019;

• regular tax underpayment for 2017 reflected on their filed tax return; or

• 2018 estimated tax payments.

However, Nellen noted that the AICPA’s earlier request on April 4 was “predicated on the IRS guidance requiring separate payments for a taxpayer’s regular tax liability and section 965(h) installment payment.” In Thursday’s letter she suggested enabling a taxpayer to apply any overpayment of regular tax liability, at their sole discretion, to any underpayment of the separate section 965(h) installment liability.

“It was fully expected that absent such an election, taxpayers could request a refund of any overpayment, apply it to their subsequent year’s estimated taxes or some combination of the two,” said Nellen.

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