# Form 1116



## jenplus4fr (Jun 5, 2016)

Hello. This is my first time filing this form. I have three questions:

1) If I declare French investment income on a paid basis, do I combine the income tax and the 17.2 CSG/CRDS, or create two separate passive forms?

2) Since the two above-mentioned taxes would be based on the previous year's income, do I use that income to prorate (and thus enter that income on the form), or use the current year's income?

3) If I work on the paid basis, do I really have to use monthly conversion rates, rather than the annual average exchange rate???

Thanks for any light you can shed here. I'm turning round in circles.


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## Bevdeforges (Nov 16, 2007)

Technically speaking, only "income tax" proper is includible on form 1116. However, after many years of back and forth on the issue, I'm told that CSG/CRDS can now be claimed as "income tax" on the 1116 form. From the horse's, um, "mouth": https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit

The general rule is that you claim the credit for the tax in the year that it is paid. However, practically speaking, you should use your last year's French tax assessment (avis d'imposition) - so, in preparing your US return covering 2019, use your French 2018 avis d'imposition. 

Theoretically, you could use the amount withheld during 2019 - but, if you do that, and then receive a refund, you're supposed to then declare the refund on your US forms as income. Not worth the hassle. Use what you have most conveniently at hand to show what you ultimately paid.



> 3) If I work on the paid basis, do I really have to use monthly conversion rates, rather than the annual average exchange rate???


Everyone I know of uses the annual average exchange rates (often those published by the IRS). If there has been some sort of big swing in the exchange rate during the year, you may want to consider using the monthly rates - but unless it works in your favor, I'd just use the annual average.

Technically speaking you can use any "reasonable" rate - usually something published either by a government agency or one of the big FX services. Just make a note of what you are using and why.


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## jenplus4fr (Jun 5, 2016)

Thank you for your quick reply. I don't understand why I'm having so much trouble wrapping my head around this. I was an applied math major...

Good to know for the conversion rate. I'd just read something in the instructions that made me wonder.

As for which income numbers to use, wouldn't the total still automatically be the 2018 amount? I can input the 2017 numbers for the foreign source income, but I think the rest flows through. (I'm using TaxAct.)


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## Bevdeforges (Nov 16, 2007)

The 2018 amount is the one to use. It gets confusing because in France the forms you file to report 2018 income are called the 2019 tax return - I suppose because you prepare them in early 2019. As an accountant by training, it drives me nuts, but not much you can do about it. <g>

Which returns are you preparing on TaxAct? Surely not 2019 yet. Or are you just getting ahead of the game?


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## Moulard (Feb 3, 2017)

jenplus4fr said:


> Hello. This is my first time filing this form. I have three questions:
> 
> 1) If I declare French investment income on a paid basis, do I combine the income tax and the 17.2 CSG/CRDS, or create two separate passive forms?


All income taxes on passive income go on the one form. Conceptually you could end up having a grand total of 14 different versions of the form in your return if you had all 7 classes of income tax AND had to submit AMT variants



> 2) Since the two above-mentioned taxes would be based on the previous year's income, do I use that income to prorate (and thus enter that income on the form), or use the current year's income?


If you are using a cash basis then you would not prorate. Just use the amount from your notice of assessment, or the French equivalent. 


> 3) If I work on the paid basis, do I really have to use monthly conversion rates, rather than the annual average exchange rate???


Technically the only time you can use the annual average exchange rate is with salary because the amount doesn't change through the year. For all other items you are meant to use the spot rate on the date that you received the income, paid the expense.


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## jenplus4fr (Jun 5, 2016)

Bevdeforges said:


> The 2018 amount is the one to use. It gets confusing because in France the forms you file to report 2018 income are called the 2019 tax return - I suppose because you prepare them in early 2019. As an accountant by training, it drives me nuts, but not much you can do about it. <g>
> 
> Which returns are you preparing on TaxAct? Surely not 2019 yet. Or are you just getting ahead of the game?


Oh, gawd no....I filed for yet the last possible extension to Dec. 15 for my 2018 taxes, and I'm panicking here!


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## jenplus4fr (Jun 5, 2016)

Moulard said:


> All income taxes on passive income go on the one form. Conceptually you could end up having a grand total of 14 different versions of the form in your return if you had all 7 classes of income tax AND had to submit AMT variants
> 
> True...I'm working with TaxAct, and was unsure whether I needed to submit one form or two separate ones and assume the software would combine them. I now see that it does combine them all.
> 
> ...


That's what I'd read, but everyone seems to be using the annual rate for general and passive income.


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## Bevdeforges (Nov 16, 2007)

jenplus4fr said:


> Oh, gawd no....I filed for yet the last possible extension to Dec. 15 for my 2018 taxes, and I'm panicking here!


Oh, if you're filing for 2017 then use the 2017 numbers. Not a problem.


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## Bevdeforges (Nov 16, 2007)

jenplus4fr said:


> That's what I'd read, but everyone seems to be using the annual rate for general and passive income.


Most companies use the spot rates for the actual dates of transactions. But unless there have been some really huge swings in the exchange rates you should be OK using the annual averages. Unless you're talking huge transactions in six or seven figures.


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