2025 (U.S. and French)

Download our 2025 U.S. and French Newsletter

Our new address is: 4 rue du Commandant Rivière, 75008 Paris

March 18, 2025

Horton Tax Services – 2025 Tax Season Communication

Dear Client,

This year (2025) marks the twentieth anniversary that we been helping the American community navigate cross-border U.S. & French tax matters. Thank you for your confidence and loyalty. We are grateful to current and former HTS team members for their contributions.

We update you on our Practice and Important Tax Matters – pages 1 – 4
We share information about making appointments, accessing our resources (checklists and spreadsheets), important information about our policies, and exchange rate details – pages 5 – 8
We update you on the 2024 & 2025 French and U.S. income tax laws – pages 9 – 32
Find information about the U.S. FATCA disclosures – pages 33 – 35
Find instructions for obtaining your real-time U.S. income tax account information on the IRS’s me platform – 36 – 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 ask 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.

In June 2024, we relocated down the street to 4 rue du Commandant Rivière. You’ll receive instructions for accessing our address when you schedule your meeting using our calendar tool.

LaHood Introduces Bill to Modernize Tax System for Americans Living Overseas

On December 18, 2024, U.S. Representative Darin LaHood (R-IL), a member of the House Committee on Ways and Means, introduced the Residence-Based Taxation for Americans Abroad Act, a bill (H. R. 10468) that would allow U.S. citizens residing outside the U.S. to elect into a residence-based taxation system for U.S. citizens currently living overseas. The bill establishes an elective process for a U.S. citizen living abroad to be treated as a non-resident without having to renounce his or her U.S. citizenship. A number of conditions would need to be met and a possible exit tax would apply for the tax year in which the U.S. citizen elects into the RBT taxation system.

We can’t predict on the likelihood of LaHood’s bill making its way into the U.S. income tax code. Past attempts to implement similar legislation have failed. For example, the Tax Fairness for Americans Abroad Act of 2018 (H.R. 7358) was introduced by Representative Holding (R-NC) on December 20, 2018, and nothing came of this.

ID.me and the Identity Protection Personal Identification Number (IP PIN)

It has become increasingly difficult to reach IRS representatives when one encounters a problem with the processing of one’s U.S. income tax return. The best way to obtain information from the IRS about your U.S. income tax account is by subscribing to the “no fee” id.me system. Once enrolled in id.me, the taxpayer can obtain an IP PIN (see next paragraph), income tax return transcripts, records of tax payments, tax reporting forms (1099s, K-1s W-2s), and copies of IRS letters.

Due to rampant income tax return-related fraud activities the IRS is frequently requiring that taxpayers verify their identities as a condition for processing U.S income tax returns. The IRS assigns Identity Protection Personal Identification Numbers (IP PINs) which are used to verify that the U.S. income tax return submitted to the IRS is really the one submitted by the taxpayer (and not by a fraudster). Sometimes the IRS will require that the taxpayer obtain an IP PIN. We have frequently observed this situation for our clients who are over a certain age. Taxpayers can request IP PINs once they sign up for id.me.

To facilitate U.S income tax return processing and to reduce risk of income tax return related fraud, we encourage our clients to use the available IRS’ electronic tools.

By signing up with ID.me taxpayers can:

1) Obtain an IP PIN

and

2) Access IRS transcripts for several years, records of tax payments and IRS letters.

Around 15% of our clients have subscribed to ID.me and most of those clients have also requested that the IRS issue an IP PIN We are making it a goal that within the next 5 years more than 90% of our clients will sign up for these two tools.

Find information about the ID.me system on pages 36-38

U.S.-Canada treaty allows foreign tax credit against NIIT – At least for Now

The Court of Federal Claims issued a partial summary judgment in Bruyea v. United States (No. 23-766T) on Dec. 5, 2024, holding that a dual Canadian-US citizen is entitled to a treaty-based foreign tax credit (FTC) applied against the Net Investment Income Tax (NIIT).

The NIIT under Section 1411 applies once adjusted gross income exceeds $200,000 (single) or $250,000 (joint). It generally imposes a 3.8% tax on investment income such as capital gains, dividends, interest, rents, and royalties, as well as income from a trade or business in which the taxpayer is passive. The tax was created by the Affordable Care Act under a new chapter in the Internal Revenue Code (IRC) and was designed to be equivalent to employment and self-employment taxes imposed on earned income.

The court found that the U.S.-Canada tax treaty requires the United States to allow a credit against United States taxes for income taxes paid or accrued to Canada and defines “United States tax” in a manner that includes the NIIT. The court further held that the treaty is self-executing, meaning the IRC does not need to explicitly implement a treaty-based tax credit for it to exist.

This ruling aligns with the court’s previous decision in Christensen v. United States in 2023, which held that U.S. citizens living abroad can claim an FTC against their NIIT under the U.S.-France tax treaty. However, in Toulouse v. Commissioner in 2011, the Tax Court reached the opposite conclusion.

For the 2024 U.S. income tax returns, we are recommending that our clients take the position that NIIT (on passive income that has been subjected to French income taxes) is eligible for foreign tax credit offset. As appropriate, our cover letter that will accompany your 2024 U.S. income tax return will communicate this position, the mechanics (on the income tax return) used for claiming the foreign tax credit, and the disclosure (treaty election statement) that will be made with the income tax return.

The statute of limitations for requesting a refund of NIIT is 10 years from the original due for filing the U.S. income tax returns. We will be in touch with you, as appropriate, to discuss filing amended U.S. income tax returns for income tax returns that showed substantial NIIT.

Good News from the Social Security Administration- Elimination of Windfall Provision

The Social Security Fairness Act has eliminated the Government Pension Offset (GPO) and Windfall Elimination Provision (WEP) retroactive to January 2024, potentially increasing benefits for over three million recipients. These provisions reduced or eliminated the Social Security benefits for anyone who received a pension based on work that was not covered by Social Security. If you are eligible for retroactive benefits, you will receive a one-time payment, with increased monthly payments beginning the following month. Due to system updates, payments will be processed in stages starting in late February 2025. To ensure you receive your benefits, log into your Social Security account at www.ssa.gov/myaccount to verify your information. Learn more at www.ssa.gov/benefits/retirement/social-security-fairness-act.htm.

Important information for U.S. persons who own or control entities doing business in the United States

Reporting companies report beneficial ownership information electronically through the website of the Financial Crimes Enforcement Network (FinCEN): https://www.fincen.gov/boi. The system provides a confirmation of receipt once a completed report is filed with FinCEN.

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 March 21, 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.

We do not assist with the preparation or filing of BOIRs.

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 2024 income and deductions to be reported on the 2024 U.S. income tax return, please use 1.0823 USD/EUR.
For the 2025 IFI, FinCEN Form 114 (explained later), and Form 8938 (if applicable) please use the year-end exchange rate of 1.0406 USD/EUR.
To convert 2024 income and deductions to be reported on the 2024 French income tax declaration, please use 1.0824 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 the end of November 2024) 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 do not 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.

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 “tartine”. Rest assured that we do not post confidential client information on our website.

Access our tax tools from the Existing Clients toolbar (see image below) 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 client’s section (see the image below). Go to “www.hortontaxservices.com” and select “existing clients” at the top of the menu. If you are prompted for a password, use “tartine”.

Accessing our Checklists and other Tax Tools

From the “Existing Clients” menu please access the appropriate from the “US and French Tax Tools” (image next)

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

Other Important Tax Information

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.

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, 2025, and benefits from an automatic 6-month extension. The final deadline for the 2024 FinCEN Form 114 is October 15, 2025. 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.

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

2025 (U.S. and French)

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