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Remedying Incorrect Section 965 Inclusions After Final Regulations

Determining How to Make Forward Adjustments to 965(h) Installment Amounts Absent IRS Guidance

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Wednesday, August 21, 2019

Recorded event now available

or call 1-800-926-7926

This course will provide tax advisers with a practical guide to remedying late or incorrect deemed repatriation filings required under Section 965 in the absence of detailed guidance from the IRS. The panel will describe recent IRS guidance offering relief from estimated tax penalties for failure to accurately calculate tax on deemed repatriation after making a Section 965(h) election, and discuss strategies for requesting relief for missed elections, as well as correcting defective calculations and adjustments of incorrect carryforwards of 2017 overpayments.


The "deemed repatriation" provisions of the tax reform legislation, requiring U.S. shareholders of "specified foreign corporations" to report and pay a one-time "transition tax" on previously untaxed foreign income, caused immense confusion for taxpayers engaged in foreign activities. The statute allowed taxpayers to elect under Section 965(h) to pay this "toll charge" interest-free over eight years, with estimated payments beginning in 2018.

In January 2019, the IRS finalized its June 2018 proposed regulations. While the final regs cleared up several sticking points, the Service left other difficult areas unresolved. Particularly challenging for tax advisers, the final regulations made several retroactive changes from the earlier guidance.

Taxpayers with potential errors in their initial 965 remittances covering the 2017 tax year must discern how and whether to make corrective filings to cover underpayments. The issuance of new Form 965 and accompanying schedules for the 2018 tax year may require taxpayers to correct previously reported amounts. The final regulations do not explicitly provide or require a taxpayer to make forward adjustments to their remaining installments under the 965(h) election.

Given the areas of uncertainty remaining in the final regulations and the cost of underreporting Section 965(h) deferrals, tax advisers must review taxpayers' filings to ensure the transition tax calculations, payment, and election were correct to avoid costly tax consequences, and determine how to rectify underreported amounts in the absence of concrete instructions.

Listen as our expert panel provides a practical and timely guide to correcting Section 965 transition tax penalties.



  1. Section 965(h) elections
  2. IRS guidance finalized in January 2019 and adjustments to prior proposed regulations
    1. Consolidated return provisions
    2. Exemptions to cash positions
    3. Anti-avoidance rule application
  3. Fiscal year taxpayers with initial payments due in 2019
  4. Treatment of incorrectly applied overpayments
    1. Correcting underpaid installments before receiving notice from IRS
    2. Responding to notice of underpayment under Sections 6654 or 6655
    3. Requesting abatement
  5. Correcting 965(h) installment underpayments and making forward adjustments to correct 2017 filing on Form 965


The panel will discuss these and other essential topics from IRS guidance:

  • How will overpayments on transition tax installments be treated?
  • When are taxpayers eligible for temporary relief from underpayment penalties?
  • Correcting transition tax underpayments
  • Filing Amended Tax Return Form 1040-X to make 965(h) installment election correctly
  • How fiscal year taxpayers must handle initial deemed repatriation payments


Gelernter, Josh
Josh Gelernter

International Tax Senior Manager
Withum Smith+Brown

Mr. Gelernter's specialties are international tax services, primarily reorganizations and restructurings.

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McCormick, Patrick
Patrick J. McCormick, J.D., LL.M.

Drucker & Scaccetti

Mr. McCormick specializes in the areas of international taxation, tax compliance, and offshore reporting...  |  Read More

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