IRS auditors are watching companies that owe offshore profit tax
The Internal Revenue Service has a message for companies that owe taxes on overseas profits: Auditors are closely watching.
The IRS included repatriation tax payments — the levies companies owe on their accumulated offshore earnings, according to the 2017 tax law — as an area of focus for the agency’s auditors, according to a list on their website updated Monday. Agency officials previously said the area is ripe for abuse because companies could try to minimize their foreign profits in an attempt to reduce their tax bills.
President Donald Trump’s tax overhaul requires U.S.-based companies to pay tax on the trillions in profits they’ve stashed abroad since 1986. The new rules set a one-time rate of 15.5 percent on cash and 8 percent on non-cash or non-liquid assets. Payments can be made over eight years.
Previously, companies had to pay the old 35 percent corporate rate, but only if they brought the money back to the U.S. If they kept the money overseas, they could defer any taxes due.
The agency also said the audit could expand beyond reviewing taxes paid on offshore profits — it could trigger an examination of other changes companies made to their tax strategies after the 2017 law, which cut the corporate rate to 21 percent and overhauled the international tax rules.
“It is anticipated that returns selected as part of the 965 campaign will also be risked and, if appropriate, examined for other material issues, especially issues related to” corporate planning in response to the tax law, the IRS said on its website, referring to the tax code section containing the repatriation taxes.
The congressional scorekeeper, the Joint Committee on Taxation, estimates the repatriation levy will generate $338.8 billion in tax revenue over 10 years. Trump has said, without specifying his source for the information, that he expects $4 trillion to return to the U.S.