U.S. EXPAT TAX GUIDE – FRANCE
How should Americans in France report self-employment income on US tax returns?
If you’re an American self-employed in France, your income must be reported on Schedule C as self-employment income. This income is taxed at the individual level and can lead to either a net profit or a net loss, affecting your overall tax liability.
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Does the US-France totalization agreement impact self-employment taxes?
Yes, the totalization agreement between the US and France ensures that Americans working as self-employed in France do not need to pay US self-employment tax, as they are already contributing to France’s social security system.
How does income tax apply to self-employment earnings in France?
Although self-employment tax is waived, income tax on earnings still applies. However, you can reduce or eliminate your US tax liability through foreign tax credits or the Foreign Earned Income Exclusion. Taxes paid in France can be used as credits on your US tax return, potentially reducing the amount owed to zero.
What do I need to do to properly report self-employment income to the IRS?
File self-employment income on Schedule C to report it correctly and benefit from the totalization agreement. You must also complete Form 8858, which addresses the foreign aspect of your income. Missing this form can result in hefty penalties, up to $10,000 for late filing.
What should you do if you missed filing important forms like Form 8858?
If you’ve missed filing Form 8858 for several years, it’s crucial to amend your previous returns promptly. Additionally, consider using the IRS Streamlined Offshore Filing Procedure to catch up on filings and avoid penalties, especially if you act before the IRS contacts you.
Why partner with a specialist Expat accountant?
Living outside of the US can make your tax filing requirements complicated. To ensure you pay the minimum amount of taxes, it’s critical to work with an accountant who understands every aspect and avenue for reducing your tax liability. We have a dedicated team of tax accountants who work exclusively with US expats earning and investing in Germany. Partnering with a specialist expat accountant can help you navigate complex tax regulations and optimize your tax situation.
