As a US expat living in France, you’ll need to get used to form filling and paperwork. You’ll need to declare assets and income in France, wherever the source is, plus pay tax, and you’ll also have to continue reporting your finances in the US. We asked the experts at Sanderling Expat Advisers, who specialise in helping Americans in France to deal with their finance and taxation requirements, to explain more about reporting your foreign income for American expats in France.
Income from the U.S.
If you’re an American living in France on a permanent or long-term basis, and therefore tax resident, it’s highly likely that you’re receiving income from a U.S. source. This could be in several forms including social security payments, fees from U.S. clients, capital gains or dividends from your U.S. brokerage accounts, interest from your U.S. bank or withdrawals from your U.S. IRA or 401k. There are lots of income sources that are classified as “foreign income”, or in French, “revenus de source étrangère.”
Good planning makes a big difference
As a tax resident of France you do, absolutely, need to report every centime of this income, in France. But you likely won’t have to pay tax on all of it. In fact, Americans in France get some pretty amazing breaks on their U.S.-sourced income. And good planning in advance makes a big difference – working with independent advisors like us to help you bring together comprehensive financial planning and assistance will help you solve problems and minimise tax liabilities before they arise.
Some income, like retirement plan withdrawals, social security and even some capital gains doesn’t get taxed in France at all. You must report them to French authorities, but you’ll receive a full credit for the taxes that would have been owed – had it not been for the US. -France tax treaty.
Other forms of U.S. income, such as dividends, receive a partial credit for the U.S. tax deducted, considerably lowering the amount of taxes/social charges you will pay in France. But your U.S.-based income does figure into the calculation of your effective tax rate in France (taux effectif).
Start getting your foreign-sourced income worked out with the French tax authorities by filling out the Form 2047 with help from the “Notice,” or instruction guide, that goes with it. This is the official form for reporting income that comes from outside of France. And for expats, it is generally the first thing to figure out as you begin your French taxes.
Reporting your foreign income for American Expats in France
There’s no getting away from the fact that there’s a lot of form filling to do.
Start by filling in all the fields that apply on the 2047. Then move to the 2042 supplements that make sense in your situation. You will see these lined up as options in your online impots.gouv account (or in the PDF forms dropdown box if you are a first-time filer). There are supplementary forms allow you to provide more details, specify credits or deductions you should be getting (2042 RICI),), or break down your micro-entrepreneur, agricultural or other self-employment income (2042 C Pro), etc…
When you’ve sorted out which of the supplements apply to you, fill in your foreign-sourced income information again. That’s correct, not a typo, you do need to do it again. You should view your 2042 supplements as summaries of each type of income you receive, with the U.S. and French sourced stuff added together.
Form 2042 enables you to list all the types of income and the deductions/credits together in a single, summary form. It offers appropriate boxes for the results of all those supplementary form efforts.
These forms address both income taxes and social charges (referred to with the acronyms CSG, CRDS, and CASA). If you have U.S. income that is subject to social charges, you will use line 9 of Form 2047 and then line 8 on the 2042C.
Also you should use Form 3916 to report every foreign-held account you had during the year being reported on. That includes investment accounts, bank accounts, money transfer accounts (i.e. Paypal and Wise) and even your credit card accounts.
All forms are available through your personal impots.gouv account. But if this is your first year of filing, you will be in paper format.
If you’d like guidance and help with any aspect of finance and tax planning as Americans in France, feel free to get in touch with Sanderling Expat Advisors at: sanderlingexpat.com
