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As 17 April quickly approaches, the stakes are higher than ever as many companies face head-on the new transition tax on unrepatriated foreign earnings, or, as we have affectionately come to know it as, the toll charge. Alvarez & Marsal, Taxand USA, presents an overview of the toll charge.
The IRS recently affirmed in IR-2018-53 issued on 13 March 2018, that companies electing to pay the toll charge in instalments must pay the first instalment, equal to 8 percent of the total toll charge liability, by their federal return due date without extensions. For calendar year companies, this means that a payment must be made by 17 April.
Many companies and individuals have likely already calculated their toll charge liability. However, given the scale of the liability coupled with the significant risk if there are any errors, it can’t hurt to have a second set of eyes on the calculation and compliance.
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More taxpayers than ever are subject to a new, complicated international tax regime. If relying on the instalment plan, there is significant risk that any late or underpayments may result in acceleration of the full toll charge liability. Without the benefit of deferral, many taxpayers could have major financial statement and cash tax impacts. Guidance is continually rolling out on the toll charge (most recently on the filing obligations), and without a second set of eyes, some taxpayers may find themselves inadvertently forfeiting the instalment plan and subject to penalties. Given the stakes, taxpayers subject to the toll charge should get a second look at this highly technical and completely new calculation.