What This Notice Means
You owe tax under section 965 of the Internal Revenue Code, the transition tax on accumulated foreign earnings enacted in 2017. You chose to pay that liability in annual installments under section 965(h). This notice tells you an installment payment is due.
What to Do
- Check the installment amount and due date on the notice.
- Make the payment on time, as section 965(h) requires.
- Keep proof of payment with this notice.
If You Can't Pay the Full Installment
This is where the risk is. If you don't pay the full installment by the due date, you may be charged the failure-to-pay penalty. Worse, the full amount of your remaining net tax liability may become due immediately.
That means one missed installment can turn a payment schedule into a single large balance. If you can't make this payment, get help before the due date, not after.
If You Disagree
Call the toll-free number on your notice to review your account with a representative. Have your account information and payment records available when you call.
Overpayments
If you paid more than the installment, you may wonder whether the extra can be refunded or credited to another year while a section 965 balance remains. The IRS addresses this in its published questions and answers on section 965 reporting for the 2017 and 2018 tax years. Review those before asking for a refund.
Keep Good Records
Section 965 installments run over several years. Keep every CP256 notice and every payment confirmation together. When questions come up about what was paid and when, those records answer them.
If you received a CP256 notice and can't make the section 965 installment, call us at (813) 229-7100.