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    Default Amending (Very) Old Tax Returns for Foreign Tax Credit

    This is actually a question that involves both state (North Carolina) and federal issues, but the State issues are more of what I'm concerned with.

    Long story short: for seven months (October 2011 to April 2012), I worked in France as an English teaching assistant. I filed returns (and all tax due) for the US both in 2011 and 2012, using the total gross income (as required) as the taxable base.

    On all salaries, France imposes two separate taxes (contribution sociale généralisée and contribution à la remboursement de la dette sociale, or CSG and CRDS) that are withheld at source that, at the time, totaled about 7.86% of income. (CSG of 7.5% and CRDS of 0.5% applied against 98.25% of the tax base). By French law, these are income taxes (but not the income tax proper, impôt sur le revenu), and a memorandum of understanding was signed between France and the US in 2019 that says the IRS will not challenge tax credits claimed on the basis of the CSG and CRDS paid. Of course, I now can amend the returns to get money back (about $300 per year), because it's within the 10-year limitation period, but... the paperwork was from 8-9 years ago, and I've moved enough times to the point where I have no idea where the papers are anymore.

    From a federal standpoint, it says all I would need is the annual withholding statement or some other proof showing how much total CSG and CRDS I paid. Is this really all I need to justify the amendment? (Also, which forms do I need to file? I'm guessing I'll need a 1040X, but they typically cover multiple years, and the 1116 for the year in question...)

    From a state standpoint, North Carolina allows credits for foreign income taxes paid, including to another country. Thus, three questions:
    • If the tax is good for the Federal credit, will it be good for the North Carolina foreign credit (here, the CSG and CRDS)? This is one case where combing through statutes and regulations hasn't gotten me anywhere.
    • NC, at the time, normally required a copy of the return filed, but one does not file a return in France for CSG and CRDS. I'm assuming that a statement of withholding here should work too, correct?
    • It says that the NC statute of limitations for amendments is "generally" three years. Is the fact that I'm amending my Federal return(s) within the Federal statute of limitations good enough to allow me to amend the NC return for the credit? (This is also another $300-ish I could get back... not a lot, but with getting ready to move soon...)

  2. #2
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    Default Re: Amending (Very) Old Tax Returns for Foreign Tax Credit

    Quote Quoting bloodbath
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    This is actually a question that involves both state (North Carolina) and federal issues, but the State issues are more of what I'm concerned with.

    From a federal standpoint, it says all I would need is the annual withholding statement or some other proof showing how much total CSG and CRDS I paid. Is this really all I need to justify the amendment?
    I have not seen those French forms to know what they contain, but presumably they clearly show what tax was withheld. If those taxes are similar to, say, FICA withholding in the U.S. where the tax is imposed on at flat rate and thus there is no chance that part of the tax you paid would be refunded by the French government because you overpaid it then the Forms should be good enough, along with an English translation. But if that's not enough the IRS will ask you for it wants to see.

    Quote Quoting bloodbath
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    (Also, which forms do I need to file? I'm guessing I'll need a 1040X, but they typically cover multiple years, and the 1116 for the year in question...)
    A Form 1040X and Form 1116 for each year you are amending. You don't use a single Form 1040X for multiple years. If you have multiple years you want to amend then you do a separate Form 1040X for each year.

    Quote Quoting bloodbath
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    If the tax is good for the Federal credit, will it be good for the North Carolina foreign credit (here, the CSG and CRDS)? This is one case where combing through statutes and regulations hasn't gotten me anywhere.
    The general rule in NC is that a refund claim must be be filed within 3 years of the due date of the return or by 2 years after the tax was paid, whichever is later. NC GS 105-241.6(a). However, there is an exception in the case of a refund claim is is related a to a federal determination of tax. The statute wording on this is not very clear but the link I provided to the NC DOR page on the subject provides a much more clear explanation.

    Quote Quoting bloodbath
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    [*]NC, at the time, normally required a copy of the return filed, but one does not file a return in France for CSG and CRDS. I'm assuming that a statement of withholding here should work too, correct?
    It might, but you'll have to ask the DOR what it will need to see.

  3. #3
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    Default Re: Amending (Very) Old Tax Returns for Foreign Tax Credit

    Quote Quoting Taxing Matters
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    I have not seen those French forms to know what they contain, but presumably they clearly show what tax was withheld. If those taxes are similar to, say, FICA withholding in the U.S. where the tax is imposed on at flat rate and thus there is no chance that part of the tax you paid would be refunded by the French government because you overpaid it then the Forms should be good enough, along with an English translation. But if that's not enough the IRS will ask you for it wants to see.



    A Form 1040X and Form 1116 for each year you are amending. You don't use a single Form 1040X for multiple years. If you have multiple years you want to amend then you do a separate Form 1040X for each year.



    The general rule in NC is that a refund claim must be be filed within 3 years of the due date of the return or by 2 years after the tax was paid, whichever is later. NC GS 105-241.6(a). However, there is an exception in the case of a refund claim is is related a to a federal determination of tax. The statute wording on this is not very clear but the link I provided to the NC DOR page on the subject provides a much more clear explanation.



    It might, but you'll have to ask the DOR what it will need to see.
    Is it due to the treaty that someone can file an amended return and get a refund more than three tax years past? If not, what is the rule that overcomes the three year limitation on the federal side of things?

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    Default Re: Amending (Very) Old Tax Returns for Foreign Tax Credit

    Quote Quoting llworking
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    Is it due to the treaty that someone can file an amended return and get a refund more than three tax years past? If not, what is the rule that overcomes the three year limitation on the federal side of things?
    There are several exceptions to the general 3 year rule for claiming refunds. One of those exceptions is for foreign tax credit (FTC) claims. For those claims, the SOL for claiming a refund is 10 years instead of three per IRC § 6511(d)(3)(A). The reason for this exception is that Congress recognized it can take years for a taxpayer to get a final determination on the income tax he/she owes to a foreign country. Interestingly enough, however, because the statute only addresses the credit and not the foreign tax deduction, you don't get the same 10 year period to amend to take the deduction.

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    Default Re: Amending (Very) Old Tax Returns for Foreign Tax Credit

    Quote Quoting Taxing Matters
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    There are several exceptions to the general 3 year rule for claiming refunds. One of those exceptions is for foreign tax credit (FTC) claims. For those claims, the SOL for claiming a refund is 10 years instead of three per IRC § 6511(d)(3)(A). The reason for this exception is that Congress recognized it can take years for a taxpayer to get a final determination on the income tax he/she owes to a foreign country. Interestingly enough, however, because the statute only addresses the credit and not the foreign tax deduction, you don't get the same 10 year period to amend to take the deduction.
    Thank you for the information. This is not something that I have encountered before and I will now keep it in the back of my mind as something I will need to research/refresh myself about if it ever comes up.

  6. #6

    Default Re: Amending (Very) Old Tax Returns for Foreign Tax Credit

    I wanted to pop back in to say thank you for the help! And also to clarify things.
    Quote Quoting Taxing Matters
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    I have not seen those French forms to know what they contain, but presumably they clearly show what tax was withheld. If those taxes are similar to, say, FICA withholding in the U.S. where the tax is imposed on at flat rate and thus there is no chance that part of the tax you paid would be refunded by the French government because you overpaid it then the Forms should be good enough, along with an English translation. But if that's not enough the IRS will ask you for it wants to see.
    Yep, the pay slips/salary statements should show this; I'm also attempting to specifically ask the HR people where I worked for a salary statement explicitly stating my wages and the amount of CSG and CRDS I did end up paying. They payslips are a bit of a byzantine mess to decipher sometimes, even for me as a French speaker, so I'm trying for the explicit salary statement.



    A Form 1040X and Form 1116 for each year you are amending. You don't use a single Form 1040X for multiple years. If you have multiple years you want to amend then you do a separate Form 1040X for each year.
    Gotcha. I was more asking about the fact that the 2014 1040X, for example, gives the option to amend 2011-2014 returns, so I was wondering which 1040X I should use.



    The general rule in NC is that a refund claim must be be filed within 3 years of the due date of the return or by 2 years after the tax was paid, whichever is later. NC GS 105-241.6(a). However, there is an exception in the case of a refund claim is is related a to a federal determination of tax. The statute wording on this is not very clear but the link I provided to the NC DOR page on the subject provides a much more clear explanation.
    That's what I read too, but it still isn't extremely clear to me what they mean by "federal determination": would it be from the date that the memorandum was established (in August 2019), or would it be from the date I file the amended return with the Federal government? If it's the former, then I need to get on it quickly... this is a case where I wish the NC DOR would have an e-mail account for inquiries, because calling them is super-expensive (and maybe not a good idea at present).

    On the other hand, I need to write to them to get a copy of my old return so I can see how much I declared (since the NC and Federal forms at least back then mirrored each other on a number of things), so I can also include my question(s) in the letter.


    Actually, another question that just came up (sorry for the bother): what exactly is meant by a "carryforward"? Why I ask is that, in my case, I would only be able to claim a refund of about $280 out of the $400 total paid for the one year. Would the carryforward then able to be taken as a credit against any future year's income tax return, or could it only be for a year in which I had foreign-source income?

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