US Taxes for Expats Living in France
When you move abroad, your tax liability to the IRS does not go away. For example, if you live in France but are an American citizen, you must file your U.S. taxes yearly.
U.S. expats living in France still have to report their incomes to the IRS annually and might even have to pay taxes. This often includes filing IRS Form 1040 and any supplemental forms or schedules by Tax Day. On top of reporting your income, you may have to report foreign financial assets and holdings to the IRS. Expats can avoid double taxation by claiming the foreign tax credit (FTC) and the foreign earned income exclusion (FEIE) when they file their taxes on time. Although expats can get filing extensions, interest will start accruing on unpaid taxes on Tax Day.
To get help with your taxes while living in France, you can call the tax CPAs for American expatriates at US Tax Help at (541) 362-9127.
Do Expats Living in France Still Have to Pay US Taxes?
If you live in France as an American expatriate, you will likely have a tax obligation to the United States. This means you must file your taxes annually with the IRS and provide any information about your foreign financial assets.
The United States has a citizenship-based taxation system. This means that you will have to report your income to the IRS if you are an American citizen, no matter where you live in the world. The IRS is concerned with your worldwide income, so you must report income earned from foreign sources. That said, our tax CPAs for American expatriates can likely apply certain deductions and credits to exclude some or all of your worldwide income from taxation.
In contrast to the United States, France operates under a residence-based taxation system. If you establish residency in France as a U.S. expat, you may have a tax obligation to the French government.
Your deadline to file and pay your U.S. taxes will be Tax Day. That said, there are filing extensions expats can take advantage of if they cannot file their taxes on time while living overseas.
If you are an established resident in France, you might not have a tax liability to your previous U.S. state of residence. However, if you still own property there or have other connections to the state, confirm if you also have to file a state tax return.
Completing Your Annual Tax Return as an Expat Living in France
Expats still have to file annual tax returns, even if tax credits and deductions totally eliminate their liability to the IRS. We can help you prepare and submit the necessary forms to the IRS on time so you do not suffer any consequences.
Generally speaking, most expats will still complete Form 1040. When stating your income on Form 1040, you must do so in U.S. dollars, not euros. You must provide your mailing address in France and the usual information you would include in Form 1040, like your name, mailing address, Social Security number, and dependents’ information.
If you have dependents, we can see if you qualify for the child tax credit, which is available to expats and domestic residents alike.
We can also help you claim the standard deduction using Form 1040, which you are still eligible for as an expat. For 2024, the standard deduction is $14,600 for single taxpayers, $21,900 for heads of households, and $29,200 for married couples filing jointly.
You must attach Form 2555 to Form 1040 to claim the foreign earned income exclusion, which can considerably lower your tax liability as an expat living in France.
Reporting Your Foreign Financial Assets as a US Expat Residing in France
On top of reporting your worldwide income to the IRS each year you live overseas, you must also report your foreign financial assets, depending on their size.
This is done in two ways. First, you might need to file Form 8938 with the IRS if you meet the criteria. This form concerns expats’ foreign financial assets, like bank accounts, securities accounts, and other assets. If your foreign financial assets are more than $200,000 on the last day of the tax year or $300,000 at any time during the tax year, you must file Form 8938. For joint filers, the reporting threshold doubles.
U.S. residents also have to report foreign financial assets using Form 8938, but the reporting thresholds for these individuals are lower.
In addition to Form 8938, you may have to file a Report of Foreign Bank and Financial Accounts (FBAR) as an expat. Taxpayers must file an FBAR if the gross value across their foreign bank accounts exceeds $10,000. This rule applies to Americans residing domestically in the U.S. and abroad in France.
Establishing Your Residency in France as a US Expat
To qualify for the tax breaks available to expats, you must first establish your residency in France. Our experienced tax accounts can do this by checking whether you pass the bona fide residence or physical presence test.
To meet the bona fide residence test, you must live in France, uninterrupted, for a whole tax year. The IRS will determine if you pass the bona fide residence test in various ways, such as by reviewing the information you provide in Form 2555, Foreign Earned Income.
Another way to get tax benefits as an expat is by passing the physical presence test. To pass this IRS test, expats must be physically present in a foreign country for at least 330 full days during a year. The days you are physically present in France do not have to be consecutive to pass the physical presence test.
US Tax Filing Extensions for Expats Living in France
The same tax deadline that applies to U.S. citizens residing domestically also applies to expats living in France. That said, the IRS provides a filing extension that is exclusively available to expatriates.
It is good practice to get all your forms to the IRS by Tax Day, no matter where you live. However, the IRS does give expats a two-month filing extension. You do not have to request this extension; the IRS will give it to you automatically.
Because Tax Day generally falls in mid-April, expats who use the automatic two-month filing extension can postpone their filing deadline to mid-June.
If you still need more time to prepare and file your taxes, you can request a six-month filing extension from the original Tax Day deadline. We can help you do this by filing Form 4868 and submitting it to the IRS.
Preventing Double Taxation as a US Expat Living in France
There are two main ways for expatriates in France to avoid double taxation on their worldwide income: by claiming the foreign earned income exclusion and the foreign tax credit.
The Foreign Earned Income Exclusion
The FEIE lets you exclude a large portion of your foreign earned income from taxation by the IRS. In 2024, the maximum exclusion is $126,500 per person. Joint filers living in France can exclude up to $253,000 of their foreign income from taxation. The French government will likely tax this income, but the IRS will not when you exclude it.
The FEIE does not let you exclude income from domestic sources. So, if you live in France but work remotely for an American company, you cannot exclude that income using the FEIE.
You can exclude money used on foreign housing expenses with the foreign housing exclusion. Depending on your FEIE, our tax CPAs can review your finances to confirm your foreign housing exclusion amount.
The Foreign Tax Credit
The foreign tax credit allows expats living in certain countries to apply taxes paid to that country to their IRS tax liability, dollar for dollar. For example, paying income tax to the French government would offset any income tax you might owe the IRS. To claim the FTC, you must pass the bona fide residence or physical presence tests and file Form 1116 with the IRS on time. Generally, war profits, income, and excess profits taxes are eligible for the FTC.
Paying Back Taxes as an Expat in France
If you owe taxes to the IRS as an expat, prioritize getting the necessary information to the IRS as soon as possible. If you wait too long to file, you might lose your opportunity to claim the FTC, the FEIE, or other deductions or exclusions.
Although the IRS does fine taxpayers who file late, it still lets them get refunds in some cases. Our tax accountants can help you prepare and file back taxes while considering your statutes as an expatriate.
While filing back taxes within three years of their original due date can still result in a tax refund for expats, they might be unable to claim certain exclusions. For example, expats who file late returns might be ineligible to use the foreign earned income exclusion or the foreign tax credit, depending on the situation.
If you cannot pay all the back taxes you owe, you can use a short-term or long-term payment plan through the IRS.
IRS Penalties for Expats Who Do Not File Their US Taxes
Interest will start accruing on any unpaid tax on Tax Day. On top of paying this interest and unpaid tax, you might get financially penalized for filing your taxes late.
The IRS has various penalties for late filers, including expats. If you file your return but fail to pay the necessary tax, you might get a failure-to-pay penalty of 0.5% of the unpaid taxes for each month they remain unpaid, up to 25%.
Furthermore, there is a failure-to-file penalty, which is 5% of all unpaid taxes for each month a return remains unfiled, up to 25%.
The IRS also has accuracy-related penalties. For example, if you understate your tax liability by 10% or $5,000, whichever is greater in your case, you might get a fine of 20% of the portion of underpayment in question. The IRS charges interest on penalties, so it is important to avoid them by preparing a thorough return or paying penalties promptly after the IRS imposes them.
Some of the biggest IRS penalties concern issues with information returns, like Form 8938 and the FBAR. If your foreign financial assets put you above the reporting threshold for Form 8938 but do not file it, you could be fined up to $10,000. If you continue not to file Form 8938 after the IRS notifies you of your noncompliance, you could get an additional penalty of up to $50,000. Willful FBAR violations could result in fines of up to $100,000 or 50% of the contents of your foreign bank accounts, whichever amount is larger.
Hire an Accountant Who Helps US Expats Living in France File US Taxes
Dealing with filing two sets of tax returns, one to the IRS and another to the French government, can cause serious headaches for expats living abroad. We can alleviate some of that stress by planning, preparing, and filing your American taxes.
When approaching your U.S. taxes, we will look at when you moved to France and officially established residency there. If the IRS questions your residency in France, showing that you pay taxes, own property, and work in another country can clarify the issue.
We can then assess your income sources to determine which deductions and exclusions you qualify for. Many expats can exclude all of their foreign earned income from IRS taxation. Through the process of tax planning, we can review your foreign financial holdings, assets, and income against current IRS credits and perks to lower your tax liability as much as possible while remaining compliant with IRS filing requirements for expatriates.
Call Our Tax Accountants for Help Today
To start preparing your taxes while living abroad, you can call the tax CPAs for American expatriates at US Tax Help at (541) 362-9127.
