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us 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 totalization agreement between the US and France affect 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.

How do you properly report self-employment income to the IRS to avoid the 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.

What can you do if you’ve missed filing important forms like Form 8858?

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.

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