# “U.S. Citizens in France Win 7-Year Fight With the IRS”



## underation (Oct 25, 2018)

> The U.S. government will stop contesting a tax deduction sought by Americans living in France, according to a law firm involved in a seven-year legal battle over the levy.
> 
> The Internal Revenue Service said in court filings last week that it should have allowed U.S. taxpayers resident in France to deduct so-called Generalized Social Contribution taxes, a levy imposed on income in France, said Stuart Horwich, a U.S. lawyer at Horwich Law in London. He estimated that roughly $100 million could be at stake and some people could seek refunds dating back 10 years.


https://www.bloomberg.com/news/arti...france-win-7-year-fight-with-irs-over-csg-tax


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## Bevdeforges (Nov 16, 2007)

Thanks for posting this - I'm going to link this over to the French section of the forum for those who are interested.

And just a note here for anyone interested. Reading through the article, what they are saying is that the CSG paid will be available as part of your Foreign Tax Credit (FTC) if that's how you do your US taxes. (Use of the term "deducted" or "deduction" is not correct in this context.)

Technically, you can only claim the FTC for income taxes paid to a foreign government. That the CSG is called a "cotisation" (social insurance) here in France doesn't help the situation. But it looks like now that little matter has been clarified.


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## underation (Oct 25, 2018)

A little information blurb has appeared on an IRS webpage about foreign tax credits:



> *French Contribution Sociale Generalisee (CSG) and Contribution au Remboursement de la Dette Sociate (CRDS)*
> 
> In 2019, the United States and the French Republic memorialized through diplomatic communications an understanding that the French Contribution Sociale Generalisee (CSG) and Contribution au Remboursement de la Dette Sociate (CRDS) taxes are not social taxes covered by the Agreement on Social Security between the two countries. Accordingly, the IRS will not challenge foreign tax credits for CSG and CRDS payments on the basis that the Agreement on Social Security applies to those taxes.
> 
> Taxpayers have 10 years to file a claim for refund of U.S. tax with respect to a foreign tax credit. The 10-year period begins the day after the regular due date for filing the return (without extensions) for the year to which the foreign taxes relate. The IRS will update information on claiming these taxes as foreign tax credits soon.


https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit


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## underation (Oct 25, 2018)

“A shared understanding.”



> [..]
> 2. On May 30, 2019, the State Department formally notified to IRS Office of Chief Counsel that the.State Department and France had finalized a shared understanding that, for purposes of Article 2(3) of the Totalization Agreement between the United States and France (“the Totalization Agreement"), the laws establishing the contribution sociale généralisée ("CSG") and the contribution pour le remboursement de la dette
> sociale ("CRDS")do not "amend or supplement" the laws set forth in Article2(1)(b) of the Totalization Agreement. A copy of the May 30, 2019 letter is attached hereto.
> 
> ...


http://hortontaxservices.com/wp-content/uploads/2019/06/Status-Report-Filed-June-19.pdf


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## jenplus4fr (Jun 5, 2016)

Question: if I've filed FEIE in the past, can I go back the ten years to amend our returns, now that the CSG is allowable as a tax credit? Or am I still limited to three years?


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## Bevdeforges (Nov 16, 2007)

jenplus4fr said:


> Question: if I've filed FEIE in the past, can I go back the ten years to amend our returns, now that the CSG is allowable as a tax credit? Or am I still limited to three years?


Not sure what you're trying to accomplish here. The FEIE allows you to simply "exclude" your earned income. If you're thinking of converting back to taking the Foreign Tax Credit instead of the FEIE, I would run the numbers carefully before doing that.

If you're going to claim back the CSG credit against investment or other "unearned" income that generated taxes for you in prior years, just be aware that you'll have to apportion the CSG credit over your "earned" and "unearned" income.

And, if you're thinking of amending to use the FTC instead of the FEIE, just check the rules about "revoking" the option to use the FEIE (which is what you'd be doing). Once you have revoked, you can't just go back to the FEIE for a certain number of years - or you need "permission" from the IRS to go back to the FEIE after having revoked it.


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## jenplus4fr (Jun 5, 2016)

Bevdeforges said:


> Not sure what you're trying to accomplish here. The FEIE allows you to simply "exclude" your earned income. If you're thinking of converting back to taking the Foreign Tax Credit instead of the FEIE, I would run the numbers carefully before doing that.
> 
> If you're going to claim back the CSG credit against investment or other "unearned" income that generated taxes for you in prior years, just be aware that you'll have to apportion the CSG credit over your "earned" and "unearned" income.
> 
> And, if you're thinking of amending to use the FTC instead of the FEIE, just check the rules about "revoking" the option to use the FEIE (which is what you'd be doing). Once you have revoked, you can't just go back to the FEIE for a certain number of years - or you need "permission" from the IRS to go back to the FEIE after having revoked it.


I had been thinking of amending to use the FTC instead of the FEIE, so as to take advantage of the child tax credit and the FTCs on CSG that are now allowed. Before, it didn't seem to make that much sense in our case. Now, though...I'm just not sure which filing deadline would apply here - 3 or 10 years.


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## Bevdeforges (Nov 16, 2007)

I honestly don't know which deadline would apply. Though if you file amended returns back more than 3 years, you open up those prior years for potential audit - on anything, not just what you filed the amendment about. 

Given some recent stories about the IRS coming back and fining folks for filing a form 3520 but NOT the 3520-a (evidently relevant for us overseas taxpayers), I'd be wary of opening any years to audit (or review of any kind).


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## jenplus4fr (Jun 5, 2016)

Bevdeforges said:


> I honestly don't know which deadline would apply. Though if you file amended returns back more than 3 years, you open up those prior years for potential audit - on anything, not just what you filed the amendment about.
> 
> Given some recent stories about the IRS coming back and fining folks for filing a form 3520 but NOT the 3520-a (evidently relevant for us overseas taxpayers), I'd be wary of opening any years to audit (or review of any kind).


Would you believe I just got off the phone with the IRS about this - after holding for 20minutes, off and on, the answer was "I don't know. We don't have much guidance on this yet." ?! He seemed to think it wouldn't be unreasonable to go back the 10 years, with an explanation. I hadn't thought about the audit issue, though. I know there are a few errors that I could fix along the way, but I may just be opening up Pandora's box. The année blanche doesn't help matters, either! I've been tearing my hair out this week...To do or not to do????


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## Bevdeforges (Nov 16, 2007)

What's worse is that, if you do get advice over the phone from the IRS and it turns out it's wrong (which it sometimes is), you have no recourse to saying, "but that's what the guy from the IRS told me to do." The IRS will not stand behind the information that they give out in any form other than a written letter of determination. (And you gotta pay to get one of those.)

Tread lightly with the IRS. Unless there are really big bucks to be gotten back from them (in which case they WILL scrutinize your amendments pretty carefully) you may want to just start going the FTC route going forward.


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## jenplus4fr (Jun 5, 2016)

After studying this all afternoon, I'm starting to think you may be right. I could have built up enough credits to use to cover l'année blanche, and I'd be basically where I am now, able to use the FEIE this year, and start with FTC next year. I think the main difference would be in losing out on the child tax credits I forfeited in past years.


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