The IRS has just announced new information regarding the transition tax, mainly revolving around deadlines and extensions for the 8-year installment plan. Through three new FAQs on the IRS’s information website, the updates are as follows:
- For taxpayers who failed to pay the first installment by April 18, 2018 but made a valid election to pay based on the 8-year installment plan, the IRS will waive the late-payment penalty if the installment is paid in full by April 15, 2019; however, interest will apply on the payment. For taxpayers qualifying for the June 15, 2018 filing deadline the extension is until June 17, 2019. To qualify for this extension the total transition tax must be less than $1 million.
- Taxpayers who have already filed a return for 2017 and did not elect the 8-year installment agreement can file an amended return to make the election by October 15, 2018.
- For taxpayers that had their 2017 overpayment applied to the transition tax instead of the first quarter of 2018 estimated tax, there will not be an estimated tax penalty if they catch up on their payments by June 15, 2018.
In summary, the IRS is providing relief for people that did not know about the transition tax in time, or could not make the deadline of April 18th to calculate and pay the first installment, so that they have until October 15th to correctly enter the installment plan if they meet certain criteria and payment terms.