The Internal Revenue Service issued a notice to corporate taxpayers to provide more information about the tax rates they will be paying as they transition to the new tax law.
The IRS noted that many U.S. corporations use a fiscal year end instead of a calendar year end for federal income tax reporting purposes. Under the recently enacted Tax Cuts and Jobs Act, a corporation with a fiscal year that includes Jan. 1, 2018 is supposed to pay federal income taxes using a blended tax rate and not the flat 21 percent tax rate under the TCJA that would generally apply to taxable years beginning after Dec. 31, 2017.
Corporations can figure their federal income tax for fiscal years that include Jan. 1, 2018, by first calculating their tax for the entire taxable year by employing the tax rates in effect prior to the tax code overhaul and then calculating their tax with the new 21 percent rate, subsequently proportioning each tax amount based on the number of days in the taxable year when the different rates were in effect. The sum of the two amounts is the corporation’s federal income tax for the fiscal year.
The IRS noted the blended rate applies to all fiscal year corporations whose fiscal year includes Jan. 1, 2018. Fiscal-year corporations that have already filed their federal income taxes that don’t reflect the blended rate may want to consider filing an amended return, according to the IRS.
On Monday, the IRS issued
The IRS also pointed out the federal sequester law remains in effect for the 2018 federal fiscal year, and corporations need to be aware of how it could affect their tax credits and refunds. The IRS has
