No Relief for Late Installment Election on 965 Tax
As part of the Section 965 transition tax, there was the option to elect a penalty free and interest free installment agreement to pay the taxes over 8 years. While the first two payments were not due until April 15, 2019, the election was required to be made by the extended filing deadline of the 2017 tax return.
Per our discussions with the IRS, at this time there is not any relief to file a late election. Furthermore, since this is a statutory deadline the IRS is not permitted to make reasonable cause exceptions. This is a problem because many tax preparers and taxpayers failed to address the transition tax timely. Now, once they correct the error, or if the IRS discovers it and assesses the tax, the full amount will be due immediately and subject to penalties and interest. It is likely that this will cause many taxpayers to choose to make a Section 962 election and avoid owing any taxes when possible.
This issue illustrates a common theme, with noncompliance issues the sooner they can be addressed the better, and things only become more complicated with time.