French Taxes - IRS Clarifies How to Claim Refund for Previously Non-Creditable (CSG) & (CRDS) taxes

The IRS website; Foreign Tax Credit states that US employers may not file for refunds claiming the foreign tax credit (FTC) for the previously non-creditable French Contribution Sociale Generalisee (CSG) and Contribution au Remboursement de la Dette Sociate (CRDS) taxes withheld or otherwise paid on behalf of their employees. IRS has also clarified how individuals can claim FTCs in prior years related to the CSG and CRDS taxes. 

IRC Sec. 901 generally permits taxpayers to claim an FTC for income, war profits, and excess profits taxes paid or accrued during the tax year to any foreign country or to any U.S. possession.

Taxes paid to a foreign country in accordance with a social security totalization agreement aren't eligible for the FTC.

FTC applies to CSG and CRDS. The IRS has stated that the US and France memorialized through diplomatic communications an understanding that the CSG and CRDS taxes are not social security taxes covered by the Totalization Agreement. Accordingly, the IRS will not challenge FTCs for CSG and CRDS payments on the basis that the Totalization Agreement applies to those taxes.

IRS reminded taxpayers of the 10-year period to file a claim for a refund with respect to a FTC.

IRS has clarified that US employers may not file for refunds claiming a foreign tax credit for CSG/CRDS taxes withheld or otherwise paid on behalf of their employees.

It has also noted that individuals may file amended returns, using Form 1040X to include accompanying Form 1116, Foreign Tax Credit, going back to tax year 2009.

The individuals should write “French CSG/CRDS Taxes” in red at the top of Forms 1040-X, and file them with accompanying Forms 1116.

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