u.s. expat tax guide – france
How is self-employment income from France reported on a US tax return?
If you’re an American self-employed in France, which would typically be under the status of micro-entrepreneur (formerly known as auto-entrepreneur), your income needs to be reported on Schedule C as self-employment income.
This income is taxed at the individual level and can result in either a net profit or a net loss. A net profit is taxed, while a net loss can potentially reduce your tax burden either in the current year or in future years.
Does the US-France treaty impact self-employment taxes?
Yes, thanks to the totalization agreement between the US and France, Americans working as self-employed in France do not have to pay US self-employment tax. This is because they are already contributing to the social security system in France.
What about income tax on self-employment earnings in France?
Even though there’s no self-employment tax due, income tax might still apply. However, you can often offset this through foreign tax credits or the foreign-earned income exclusion, effectively reducing or even eliminating your US tax liability.
This means if you’ve been paying income tax in France, you can use these credits or exclusions on your US tax return to potentially owe nothing.
Running your own business means managing taxes on your own. With professional guidance, you can stay on top and avoid mistakes.
How to report self-employment income and avoid self-employment tax?
To correctly report your self-employment income and benefit from the totalisation agreement, you must file it on Schedule C. Additionally, it’s important to complete Form 8850 to properly handle the foreign aspect of your taxes.
Many people miss filing Form 8858, which is necessary and carries a heavy penalty for late filing—up to $10,000.
Missed Form 8858? What can you do?
If you’ve neglected to file Form 8858 for several years, it’s advisable to amend your previous returns as soon as possible. Additionally, engaging in the IRS Streamlined Offshore Filing Procedure can be a strategic move to catch up on your filings and protect yourself from penalties, particularly if you handle this before the IRS reaches out to you.
Aya Takriti, an IRS Enrolled Agent with 11 years of expat tax experience, specializes in US tax preparation, tax planning and tax advice for US citizens and Green Card holders living and working in the Middle East. *Schedule a consultation with Aya today.
*30-minutes US$247.
