IRS Form 965-A – If you are an individual U.S. taxpayer (or file as one, such as certain trusts and estates) with lingering Section 965 transition tax obligations from the 2017 Tax Cuts and Jobs Act, IRS Form 965-A remains essential. Even in 2026, many taxpayers must continue filing this form annually until their net 965 tax liability is fully paid—especially those with installment payments or deferred S corporation liabilities.
This comprehensive guide, drawn directly from official IRS sources (including the January 2021 revision of Form 965-A and its instructions), explains everything you need to know: who files it, when, how to complete it step by step, key elections, and common pitfalls.
What Is IRS Form 965-A?
Form 965-A (Individual Report of Net 965 Tax Liability) tracks and reports your net Section 965 tax liability across tax years. Section 965 imposed a one-time transition tax on untaxed foreign earnings of specified foreign corporations (often called deferred foreign income corporations or DFICs) as the U.S. shifted to a territorial tax system.
The form serves as a cumulative lifelong record of:
- Your net 965 tax liability (with vs. without Section 965 inclusions).
- Elections to pay in 8 annual installments under Section 965(h).
- Deferred liabilities from S corporation ownership under Section 965(i).
- Payments made each year.
- Transfers, assumptions, triggering events, or adjustments to the liability.
You must file Form 965-A every tax year in which you have any outstanding net 965 tax liability (including deferred amounts) at any point during the year. It attaches to your Form 1040, 1041, or other individual income tax return.
Download the official form here: IRS Form 965-A PDF
Official Instructions: Instructions for Form 965-A (PDF)
Who Must File Form 965-A?
File if you are:
- An individual or entity taxed like an individual (e.g., trusts, estates filing Form 1041).
- A U.S. shareholder who had a Section 965(a) inclusion in 2017, 2018, 2019, or 2020 (including pass-through entities).
- Still carrying any unpaid net 965 tax liability, whether under installment election or S corporation deferral.
- Involved in a transfer/assumption of liability or triggering event for deferred S corp amounts.
Note: Corporations and REITs use Form 965-B instead. Form 965-A is strictly for individuals and similar filers.
Even if your liability was fully paid years ago, you generally do not need to file in years with zero outstanding balance.
Background: The Section 965 Transition Tax
Enacted in 2017, Section 965 required U.S. shareholders to include their pro-rata share of post-1986 deferred foreign income from DFICs. Tax rates were 15.5% on cash/cash equivalents and 8% on other assets (for individuals, effectively applied via the net tax liability calculation).
Many taxpayers elected:
- 8-year installments (Section 965(h)) — 8%, 8%, 8%, 8%, 8%, 15%, 20%, 25%.
- S corporation deferral (Section 965(i)) — deferral until a triggering event (e.g., certain stock dispositions without a consent agreement).
Form 965-A ensures IRS tracking of these ongoing obligations.
When and How to File Form 965-A?
- Deadline: Attach to your timely-filed income tax return (including extensions) for the reporting year.
- Electronic filing: Included with your e-filed return.
- Amended reports: Check the “amended report” box at the top if correcting prior reporting (e.g., due to NOL carrybacks under the CARES Act).
You may need to file multiple years’ worth of history on a single Form 965-A to show the cumulative picture.
Step-by-Step: How to Complete Form 965-A?
The form has four main parts. Here’s a breakdown based on the official instructions:
Part I: Report of Net 965 Tax Liability and Election To Pay in Installments
This is the core section. Lines 1–8 cover different inclusion/trigger years (primarily 2017–2020).
Key columns:
- (b) Net tax liability with all Section 965 amounts.
- (c) Net tax liability without Section 965.
- (d) Net 965 tax liability = (b) – (c).
- (e) Deferred S corp portion (from Part III).
- (f) Installment-eligible amount = (d) – (e).
- (g) Installment election? (Yes/No).
- (h)/(i) Full payment or installment amount.
- (j) Transfers out (negative), transfers in/adjustments (positive).
- (k) TIN of the other party.
Part II: Record of Payments Made
Tracks actual payments by installment year. Use the 8-year schedule if elected. Report the amount paid in the current reporting year in column (k) — this flows to your tax return (e.g., Schedule 2, Form 1040).
Part III: S Corporation Shareholder Report & Deferral Election
Complete one row per S corporation. Calculate the net 965 liability attributable only to that S corp, then elect deferral (Yes/No). Totals flow to Part I, column (e).
Part IV: Annual Report of Deferred S Corporation Liabilities
Required every year until the deferred amount is fully paid or triggered. Tracks beginning balance, triggering events, transfers, and ending balance.
Failure to file Part IV when required triggers a 5% addition to tax on the deferred amount.
Key Elections on Form 965-A
- Installment Election (Section 965(h)) — Spread payment over 8 years. First payment (8%) due with the original return (no extension for the first installment).
- S Corporation Deferral (Section 965(i)) — Defers payment until a triggering event. Requires annual Part IV reporting.
- Transfers — Use Form 965-C (for 965(h) liabilities) or Form 965-D/E (for S corp deferrals) to formalize assumptions. Update Form 965-A accordingly.
Common Scenarios in 2026
- Installment payments ongoing: Many 2017 inclusions are now in Years 7–8 of the schedule.
- S corp trigger this year: Move the amount from Part IV (negative in column f) to Part I and decide on new installment election.
- Liability transfer: Report in column (j) and stop payments as transferor (or start as transferee).
- Adjustments (e.g., audits, NOL carrybacks): Prorate across remaining installments.
Penalties and Compliance Tips
- Late filing or failure to report deferred amounts → 5% addition to tax + possible accuracy-related penalties.
- Always keep detailed records of calculations, elections, and payments.
- Consult a tax professional familiar with international tax if you have complex ownership structures or transfers.
Related IRS Forms:
- Form 965 (original inclusion reporting)
- Form 965-B (for corporations/REITs)
- Form 965-C, 965-D, 965-E (transfer/consent agreements)
Final Thoughts
IRS Form 965-A is not a one-and-done document—it’s your ongoing compliance tool for any remaining Section 965 obligations. In 2026, accurate filing prevents surprises, penalties, and interest.
Official Resources (always check for updates):
- IRS About Form 965-A: irs.gov/forms-pubs/about-form-965-a
- General Section 965 Q&As: irs.gov/newsroom/general-section-965-questions-and-answers
Download your copy today and attach it correctly to avoid processing delays. For personalized advice, speak with a qualified tax advisor or CPA experienced in transition tax matters.
This guide is for informational purposes only and is based on IRS publications as of February 2026. Tax laws can change—verify with the latest official IRS instructions.