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 -Published: Tuesday, December 3, 2019 IRS issues final
regulations on the Foreign Tax Credit
By the A.M. Costa Rica staff The Internal Revenue Service issued final regulations on Monday on the Foreign Tax Credit, a long-standing tax benefit that generally allows individuals and businesses to claim a credit for income taxes paid or accrued to foreign governments. According to the IRS report, the Tax Cuts and Jobs Act made major changes to the tax law, including revamping the U.S. international tax system. Specifically, several foreign tax credit provisions were changed, including repeal of Section 902, which allowed deemed-paid credits in connection with dividend distributions based on foreign subsidiaries' cumulative pools of earnings and foreign taxes. The Jobs Act also added two separate limitation categories for foreign branch income and amounts includible under the global intangible low-taxed income provisions. Additionally, the Job Act changed how taxable income is calculated for purposes of the foreign tax credit limitation by disregarding certain expenses and repealing the use of the fair market value method for allocating interest expense. Finally, the Job Act made systemic changes to U.S. taxation of international income that impact the foreign tax credit calculation. These systemic changes include the introduction of a participation exemption through a dividends received deduction for certain dividends in section 245A and the introduction of GILTI, which subjects to current U.S. taxation foreign earnings that would have been deferred under previous law, albeit at a lower tax rate and subject to extra foreign tax credit restrictions. The IRS also has issued proposed regulations relating to the allocation and apportionment of deductions and creditable foreign taxes, foreign tax redeterminations, availability of foreign tax credits under the transition tax, and the application of the foreign tax credit limitation to consolidated groups. Updates on the implementation of the Tax Cuts and Jobs Act can be found on the tax reform page of IRS.gov on the agency site.  In Nov. 27, the IRS cautions taxpayers not to rely on receiving their refund by a certain date, especially when making major purchases or paying bills. “Some tax returns may require additional review and those refunds may take longer,” said the IRS. According to the IRS, just as each tax return is unique and individual, so is each taxpayer's refund. Here are a few advice by IRS for taxpayers if they are waiting on their refund but hear or see on social media that other taxpayers have already received theirs. Different factors can affect the timing of a refund. “The IRS, along with its partners in the tax industry, continue to strengthen security reviews to help protect against identity theft and refund fraud,” said the agency. Even though the IRS issues most refunds in less than 21 days, it's possible a particular taxpayer's refund may take longer. “Some tax returns require additional review and take longer to process than others,” the IRS said. It may be necessary when a return has errors, is incomplete or is affected by identity theft or fraud. On a suspicious case, the IRS said they will contact taxpayers by mail when more information is needed to process a return. By law, the IRS cannot issue refunds to people claiming the Earned Income Tax Credit or Additional Child Tax Credit before mid-February. The law requires the IRS to hold the entire refund, including the portion not associated with the credits. This helps ensure taxpayers receive the refund they're due by giving the IRS more time to detect and prevent fraud. Using the site Where's My Refund? taxpayers can check the status of their refund within 24 hours after the IRS has received their electronically filed tax return or four weeks after mailing a paper return. More information on tax refunds can be reached at IRS.gov site. ------------------------ How familiar are you with U.S. expats claiming credit for income taxes paid to to Costa Rica? We would like to know your thoughts on this story. Send your comments to news@amcostarica.com |
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