Download our 2024 U.S. and French Newsletter

 

March 11, 2024

Horton Tax Services – 2024 Tax Season Communication

Dear Client,

Our team is honored to continue to assist you with your tax filings.  Thank you for your confidence and loyalty.

• We update you on our Practice and Important Tax Matters – pages 1 -3
• We share information about making appointments, accessing our resources (checklists and spreadsheets), important information about our policies, and exchange rate details – pages 4 – 6
• We update you on the 2023 & 2024 French and U.S. income tax laws – pages 7 – 28
• Find information about the U.S. FATCA disclosures – pages 29 – 31
• Find instructions for obtaining your real time S. income tax account information on the IRS’s  ID.ME  platform – 32 – end

Practice Update

To allow us to better focus on your tax matters and to ensure timely delivery of your tax returns we have stopped “marketing” and have shifted to a “referral only” system for interviewing prospective clients. We kindly asking that you provide our contact details only to family members and close friends. The objective is to allocate all of our professional time to serving you.

Important information for U.S. persons who own or control entities doing business in the United States – New Reporting Requirement for Companies Created or Registered to Do Business in the United States – Beneficial Ownership Information

As of January 1, 2024, the Corporate Transparency Act, requires that every corporation, LLC, and other entity created by the filing of a document with a secretary of state or similar office, that is registered or created to conduct business in the United States is required to file a beneficial ownership information report. The form must be completed no later than January 1, 2025. Newly created companies (created in 2024) have 90 calendar days to file from the date that they received public notice that their company’s registration or creation is effective. The report requires that companies doing business in the United States share information with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) about individuals who own or control the companies. The report only needs to be submitted once and is not an annual requirement, unless the filer needs to change or update information.

The reporting companies must include the following four pieces of information about each beneficial owner: their name, date of birth, address, and identifying number from a non-expired U.S. passport, U.S. driver’s license, or an identification document issued by a State. The company must also include information about itself such as its name and address. There are potential fines and civil penalties for failure to comply, so it is something to take seriously.

Please be advised that the following entities are considered companies for the BOI reporting purposes: LLC’s,

For more information and to file this report online, please visit: https://www.fincen.gov/boi

Other Important Tax Information

The Treasury Department and Internal Revenue Service announced that the federal income tax filing due date for individuals for the 2023 tax year is April 15, 2024.

You may have read about the problems the IRS is experiencing with tax return processing, staffing, and technology deficiencies.  In our own experience, the IRS has lost, misplaced, or just not processed some of our client’s income tax returns. If you don’t have proof that the IRS has processed your tax returns, you might wish to verify that this has been done. You can do so by establishing your online account on the IRS website or by requesting hard copy transcripts from the IRS. Under either method, you will be able to see your 2020, 2021, and 2022 IRS income tax account information. Once you obtain access to your tax information, please review it and let us know if any action is required. We include an annex, “Obtaining your U.S. Tax information from the IRS” on pages 35-37.

U.S. taxpayers have been paying U.S. Net Investment Income Tax (NIIT) on their non-U.S source passive income which includes interest, dividends, capital gains, and rental income. A suit was filed in 2020 challenging the IRS’ position that NIIT is due in a situation where a taxpayer has taken an income tax treaty-based position that foreign taxes should offset the NIIT. In 2023, The United States Court of Federal Claims issued its decision for “Matthew and Katherine Kaess Christensen v. United States” (No. 20-935T) and found that Christensen was correct in claiming a credit for French income taxes against the U.S. NIIT. This finding would allow taxpayers to offset NIIT on non-U.S. source investment income and gains in situations where the income and gains are subjected to foreign income taxes (in a country with an income tax treaty with the United States) at a rate that is superior or equal to the combined U.S. income tax and NIIT tax rate.  However, on December 22, 2023 the IRS appealed the decision (case 24-1284) in the U.S. Court of Appeals, Federal Circuit. Until the Court of Appeals issues its decision, the IRS will very likely refuse any refund claims made on amended income tax returns. Taxpayers who paid substantial NIIT on the 2013 U.S. income tax return should file a protective refund claim before April 15, 2024. We expect the U.S. court of appeals will likely reach a conclusion during 2025.

The French tax administration has done an excellent job of implementing the complicated pay-as-you-earn tax collection system, and you can view the administration’s dashboard and control, to some degree, how taxes are collected on your online account. If you do not already have access to your online French income tax account at impots.gouv.fr, you must initiate this account at your earliest convenience.

U.S. and French income tax returns are more appropriately described as “Information returns which also require you to report income”. Information-sharing agreements implemented by the governments of developed countries mean that taxpayers need to report their financial accounts to avoid the imposition of penalties (or worse). Often, the penalties for failing to disclose an account exceed the income taxes due on the corresponding income. Contact us if you discover you are out of compliance and we can help resolve and/or refer you to competent legal counsel.

Our Website & SmartVault

We’re pleased to introduce our updated website, which you can access at www.hortontaxservices.com. The password to access the tools for Existing Clients is “ratatouille”. Rest assured that we do not post confidential client information on our website.

Access our tax tools from the Existing Clients toolbar  where you’ll find our income tax return checklists and Excel workbooks to help you organize your information. We continue to improve these tools and add new ones, so please check back regularly.

Make an Appointment

If you’d like to discuss a special tax situation, please make an appointment directly on the calendar posted on our website’s existing clients section. Go to “Hortontaxservices.com” and select “existing clients” at the top of the menu. If you are prompted for a password, use “ratatouille”.

Accessing our Checklists and other Tax Tools

From the “Existing Clients” menu please access the appropriate from the “US and French Tax Tools.”

Other worksheets and tools are available on the same page below the checklist as needed.

Filing Deadlines, Exchange Rates, and Our Policy for Submitting Tax Returns

Due dates for filing the U.S. and French declarations are posted on our website and will be updated when new information becomes available.

We remind you that our clients can exchange confidential tax information with our office using a trusted internet portal service www.SmartVault.com. If you want to establish a SmartVault account or would like us to resend an invitation to establish an account, please send us an email and we will get you set up.

Key exchange rates can be found on our website and are as follows:

• For converting 2023 income and deductions to be reported on the 2023 U.S. income tax return, please use 1.0823 USD/EUR.
• For the 2024 IFI, FinCEN Form 114 (explained later), and Form 8938 (if applicable) please use the year-end exchange rate of 1.1050 USD/EUR.
• To convert 2023 income and deductions to be reported on the 2023 French income tax declaration, please use 1.0813 USD/EUR (the rate provided by the Banque de France).

For U.S. income tax returns ready to submit before the IRS e-file cutoff date (last year this was mid-November 2023) we will e-file the declarations unless you advise us not to. You may opt out of e-filing by signing and returning the last page of our checklist (available in the ‘Clients Only’ section of our website). You will be asked to review the tax return before we submit it to the IRS. We recommend that you register for a SmartVault account which will allow us to securely provide you with the tax return. Alternatively, we will e-mail you your tax return as a password-protected Adobe file. If you agree with the return, we will then submit it on your behalf upon receiving your signed authorization form. If you do not trust the integrity of these proposed methods of transmitting sensitive information, please provide us with the signed e-file opt-out form.

We offer to send U.S. income tax returns by registered mail or by FedEx if the returns cannot be e-filed. We don’t charge for this service. We maintain a permanent record of registered mail receipts and post a copy of the proof of submission to your “tax returns sent” folder on your SmartVault account.

If you would like us to mail you a copy of your income tax return, please let us know by crossing off the box at the top of the second page of the checklist. We no longer charge for this service.

FinCEN Form 114 (or “FBAR”)

The deadline for filing the FinCEN Form 114 is aligned with the U.S. tax return filing date of April 15, 2024, and benefits from an automatic 6-month extension. The final deadline for the 2023 FinCEN Form 114 is October 15, 2024. There is no additional two-month extended deadline for filing this form.

The Banking Secrecy Act of 1970 included a provision that requires U.S. persons to report their foreign financial accounts each year if the cumulative balances of those foreign accounts exceed $10,000 at any time during the year. The form name and the penalty provisions associated with this form have changed over the years. Since the 2013 tax year, this form is called ‘FinCEN Form 114’ and must be submitted on the Financial Crimes Enforcement Network’s website.

Our Tax Toolbox contains a guide and an Excel template that explains how to prepare and submit the form.  A person who willfully fails to report an account may be subject to a penalty equal to the greater of $100,000 or 50% of the balance in the account at the time of the violation. Willful violations may also be subject to criminal penalties.

Services We Provide

We prepare U.S. income tax returns, gift tax returns, and in some situations the FinCEN Form 114, and other information returns. We also prepare French income tax returns, which for some clients will now include the modified French wealth tax, Impôt sur la Fortune Immobilière (IFI). If clients choose to send their tax returns themselves, we encourage the use of a registered mail service so that you have substantive proof that the tax office received the tax return. A few euros paid to La Poste could save thousands of euros in late filing penalties.

We need to invoice for our investment in assisting with responding to tax notices. We will endeavor to provide a fee quote for our assistance with these replies before commencing work.

Services We Do Not Provide

We do not routinely assist with matters related to “taxe d’habitation, taxes foncières, redevance audiovisuelle” or other administrative concerns. We can provide follow-up on such matters, but we will bill for the extra time spent. This type of assistance is not included in our regular service or fee.

Our General Office Procedures

The IRS continues its international compliance initiative and some U.S. taxpayers will be selected for examination. Typically, these examinations focus on the foreign tax credit. Our hourly rates apply in assisting with such examinations and we will do our best to provide an estimate of the expected time for assisting with each examination.

Our fee quotes are based on the assumption that you will provide us with complete, clear information and that only routine follow-ups will be required. If we have to follow up with multiple phone calls and e-mails to obtain missing data and explanations, it will result in more time spent by us and thus a higher fee.

We generally process files on a “first-in, first-out” basis.  Upon receipt of complete information, we log your file into our database.  We will do our best to notify you if the information you have provided is insufficient to commence work.

We’ll submit requests to the IRS to extend the filing deadline for your U.S. income tax return as required. We keep proof of submission in your file.

We issue our invoices with the tax returns (or letters) and we request that clients settle their accounts in time so that we can limit the administrative time dedicated to our accounting. Clients who habitually pay late may be asked to provide a retainer fee the following year.

We do not share your information with any third party and we do not accept or pay referral fees.

Best Regards,

Steven R. Horton, CPA & Team HTS