# FATCA and other US tax laws



## danerly

Hi. I am a US citizen currently living in the US, and I'm planning to move to France (Lyon) this coming summer to be with my partner, who is French. I have been doing a bunch of reading on FACTA and the US tax laws that apply to US citizens abroad, and it's feeling a bit overwhelming.  I was browsing other postings in this forum about how people have been handling taxes, but given that the laws are changing, I'm wondering if anyone could either explain what this will mean for me in moving abroad or point me toward information that explains this in a clear and understandable way. (So how this will apply to 2014 and forward.)

A few more details about my situation that might be relevant: 

1. My partner and I are not married, but we were considering getting PACSed (not sure if this might be a bad idea for tax purposes or not?). 

2. I am not likely to be working in France right away. I am trying to find some online teaching work which would allow me to basically work in the US but live abroad, so I'm not sure exactly how this would affect my tax situation yet, but I'm assuming that I would be paying taxes in the US... Would I also have to pay taxes in France on this income? (That being said, I would eventually plan to work in France, so I'd be interested in knowing about how the new laws would affect taxation of income earned there as well.) 

3. My financial situation is not very complicated. I don't have huge amounts of savings, although I have some. I also co-own a very small amount of farmland in the US with some family members, which brings in less than $1000 in profit annually. 

I've read some very scary-sounding stuff about how in order to comply with the new laws, US citizens living abroad will have to pay someone several thousand dollars to prepare their tax forms... How true is this? I've also heard that if you make even a minor math error you could be fined $10,000-$50,000. Again, is that true? 

I've also heard that because of all this most banks won't allow US citizens to set up accounts... Has this really been people's experience?

Since I made the decision to move and I've been working on figuring out the details, I've been feeling really good about it, but this has really thrown me for a loop and making me wonder if I'm making a horrible life decision that could have major long-term financial implications... Any advice would be very much appreciated!

Thanks!
Dana


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## BBCWatcher

danerly said:


> I was browsing other postings in this forum about how people have been handling taxes, but given that the laws are changing....


They're changing? Not especially. Enforcement may be stepping up. Tax code details change from time to time in every country, but the core principles in the U.S. tax code haven't changed in many years. Citizen-based taxation has been in force for about a century, for example.

FATCA is relatively new, but it's just another piece of paper (IRS Form 8938) attached to your 1040, with the instructions and labels elsewhere updated to advise you to fill in that form if need be. From your other comments it doesn't sound like you'll be required to file Form 8938 soon. FBAR has been around for several decades. The name of the form changed recently: previously TD F90-22.1, now FinCEN Form 114.



> 1. My partner and I are not married, but we were considering getting PACSed (not sure if this might be a bad idea for tax purposes or not?).


PACS is not considered legal marriage for U.S. tax purposes, so as far as I know it has no effect on your U.S. tax situation. That's probably good, unless you would otherwise file jointly, and then it might be bad (or less good).



> ...I am trying to find some online teaching work which would allow me to basically work in the US but live abroad, so I'm not sure exactly how this would affect my tax situation yet, but I'm assuming that I would be paying taxes in the US... Would I also have to pay taxes in France on this income?


You'd be performing the work from France, so yes, you're working in France. Thus as a resident and worker in France you'll be paying French taxes. As a U.S. citizen you'll also file a U.S. tax return. Fundamentally you can either take the Foreign Tax Credit (FTC) and subtract French income taxes from the income tax you would otherwise owe to the U.S., or you can take the Foreign Earned Income and Foreign Housing Exclusions (FEIE/FHE) to exempt the first $X amount of your earned income (income from work) from U.S. taxation (with the FTC applied above that first $X amount). $X is currently just a bit less than $100K, but it varies each tax year with inflation.

As for social insurance taxes, check the U.S.-French social security treaty. You'll have to pay into either the U.S. or French system, but you won't have to pay into both.



> (That being said, I would eventually plan to work in France, so I'd be interested in knowing about how the new laws would affect taxation of income earned there as well.)


If you're in France and working, you're working in France. The fact there's a wire (or wireless transmission) between you and anybody/anything isn't particularly interesting from a tax point of view.



> 3. My financial situation is not very complicated. I don't have huge amounts of savings, although I have some. I also co-own a very small amount of farmland in the US with some family members, which brings in less than $1000 in profit annually.


France has a modest wealth tax which might apply.



> I've read some very scary-sounding stuff about how in order to comply with the new laws, US citizens living abroad will have to pay someone several thousand dollars to prepare their tax forms... How true is this? I've also heard that if you make even a minor math error you could be fined $10,000-$50,000. Again, is that true?


A fair bit of exaggeration.



> I've also heard that because of all this most banks won't allow US citizens to set up accounts... Has this really been people's experience?


Not apparently in France.


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## Nononymous

For as long as you possess your blessed US citizenship, you'll be filing US taxes and FBARs and all that.

One assumes that you will have the appropriate visa to live and work in France?

For the French taxes, you might want to repost this to the France forum. If you plan to work online for a US employer and want to do things on the up-and-up (i.e. legally) you would need to set up as a consultant in France and pay French taxes and social security. I don't pretend to know how this works, but others do. (There are reports that you can set this up on a visitor's visa, which doesn't otherwise grant you permission to work.) You likely would not face double taxation, but would only pay in France. This is definitely the approach to take if you plan on staying permanently. 

If you were only planning to stay for a year or two on a visitor's visa and were willing to tolerate a small amount of risk, you could work remotely and simply pay US taxes. While this is technically illegal, it's not easily detected.


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## danerly

BBCWatcher: Thank you for the quick reply and helpful information!

Where would you suggest I go to find comprehensive information about how to file taxes as a US citizen living abroad? 

Also, just FYI, the information I found that you said is exaggeration came from the AARO website (the taxation section -- apparently I can't post a link here, but if you go to their website and click on the taxation page, there it is). They seem like a reputable organization, so I'm not sure what to make of this... 

With regard to your comment about being in France and working = working in France -- does this mean that I would need a French work visa in order to do work for a US company/organization while living in France? I was hoping to find this sort of online work in order to have a way to make some income while living there on a long-stay visitor visa (which doesn't allow me to work there). 

Thanks again!
Dana


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## danerly

Oops -- I posted my reply before I saw your comment, Nononymous. I guess you answered my question about the visa situation. I'll see what people have to say about this in the France forum. Thanks!


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## Nononymous

danerly said:


> Oops -- I posted my reply before I saw your comment, Nononymous. I guess you answered my question about the visa situation. I'll see what people have to say about this in the France forum. Thanks!


Look up the infamous IRS publication 54 for instructions on being an American abroad.

I regularly get in trouble for saying this, but... 

Online/remote work is still technically work, so to be completely legal you should have a work permit and pay taxes wherever you're living yada yada yada. It's also very, very undetectable, so it's a marvelous way to support yourself if you are in a country legally but temporarily (either as a tourist, or as a trailing spouse, or student). 

To stay in the EU past 90 days you need some sort of visa. France seems to be fairly liberal with the one year visitor's visa, but you may need to provide proof that you can support yourself, which shouldn't be from working while in France, obviously. They may not be thrilled with the "going to live with my boyfriend/girlfriend and I promise I won't work" application. Have you spoken to the French consulate about your plans?


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## danerly

Nononymous: I was planning to go on a 1-year visitor long-stay visa. I do have the means to support myself according to their requirements -- I'm just hoping to have an additional source of some income so that I'm not completely eating through my savings while I'm there... 

My longer-term goal would be eventually to get the type of work visa that allows me to be self-employed so that I can set up a private practice as a psychologist there, but I'm looking for something else to do while I'm trying to get all my proverbial ducks in a row, since that process is a bit complicated. (Also, after about a year, it's likely that we would decide to get married, which might simplify things a bit, visa-wise.) So the working remotely idea would probably only be for a year. But I'm also very hesitant to do anything that might get me in legal trouble...


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## Nononymous

Getting married would greatly simplify matters. Not sure if there's a lower-commitment option that still gets you a work visa. 

Best to take the knowledge you have now and head on over to the France forum. There are reports that you can do the self-employed thing (auto-entrepreneur) on a visitor's visa, which means you could legally do and pay taxes on US online work. This is certainly the safest option if you intend to stay permanently. But also you probably don't face much risk in doing some part-time remote work for beer money while getting settled, if it's a temporary measure.


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## Bevdeforges

danerly said:


> Hi. I am a US citizen currently living in the US, and I'm planning to move to France (Lyon) this coming summer to be with my partner, who is French. I have been doing a bunch of reading on FACTA and the US tax laws that apply to US citizens abroad, and it's feeling a bit overwhelming.  I was browsing other postings in this forum about how people have been handling taxes, but given that the laws are changing, I'm wondering if anyone could either explain what this will mean for me in moving abroad or point me toward information that explains this in a clear and understandable way. (So how this will apply to 2014 and forward.)


As has already been said, Publication 54 is your guide to how the international side of things works.



> A few more details about my situation that might be relevant:
> 
> 1. My partner and I are not married, but we were considering getting PACSed (not sure if this might be a bad idea for tax purposes or not?).


For US tax purposes, this will do nothing for you - except allow you to continue to file as single. (There are disadvantages to filing married, filing separately that you'll want to consider before taking the plunge.)

For French tax purposes, being PACS'd will make it so that you file together as a "household" - which is generally to your advantage.



> 2. I am not likely to be working in France right away. I am trying to find some online teaching work which would allow me to basically work in the US but live abroad, so I'm not sure exactly how this would affect my tax situation yet, but I'm assuming that I would be paying taxes in the US... Would I also have to pay taxes in France on this income? (That being said, I would eventually plan to work in France, so I'd be interested in knowing about how the new laws would affect taxation of income earned there as well.)


You are considered to be working wherever you are physically located while doing the work. So, doing online teaching while you are in France means you are working in France. To do so legally, you would need to set up a business entity of some kind (probably an auto-entrepreneur) so that you'd be properly registered to pay your cotisations (social insurances).



> 3. My financial situation is not very complicated. I don't have huge amounts of savings, although I have some. I also co-own a very small amount of farmland in the US with some family members, which brings in less than $1000 in profit annually.


In very general terms, you usually wind up paying tax on real estate income and transactions to the country in which the real estate is located.



> I've read some very scary-sounding stuff about how in order to comply with the new laws, US citizens living abroad will have to pay someone several thousand dollars to prepare their tax forms... How true is this? I've also heard that if you make even a minor math error you could be fined $10,000-$50,000. Again, is that true?


Not true - even if you did hear it from AARO. For those with fairly simple finances, the forms are fairly easy to do each year, once you get through the first round. Those who spend thousands to have their taxes prepared professionally are those who have zillions in complicated investments they are trying to protect. Keep it relatively simple and it isn't as hard as it looks.



> I've also heard that because of all this most banks won't allow US citizens to set up accounts... Has this really been people's experience?


This appears to be the case with some types of investment accounts. Generally speaking (and especially in France) there is no restriction on Americans opening ordinary checking and savings accounts.



> Since I made the decision to move and I've been working on figuring out the details, I've been feeling really good about it, but this has really thrown me for a loop and making me wonder if I'm making a horrible life decision that could have major long-term financial implications... Any advice would be very much appreciated!


Depends on what you're looking for. If you want to live and work in France, I wouldn't let the US tax laws put you off your dream. There are ways of coping with the situation, but you need to consider the financial side of things as part of the whole picture.
Cheers,
Bev


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## Bevdeforges

Just one added note here - you should probably post a query over in the French section regarding your plans.

I see a couple of tricky issues regarding your visa status in what you've posted here already. Basically, it isn't normally possible to get a work visa for France without returning back home to re-apply for an all new visa. There are some exceptions to that, but the details are probably best discussed over in the France section.
Cheers,
Bev


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## BBCWatcher

danerly said:


> Where would you suggest I go to find comprehensive information about how to file taxes as a US citizen living abroad?


I see Nononymous has already pointed you to IRS Publication 54. As tax-related instructions go, it's good.



> Also, just FYI, the information I found that you said is exaggeration came from the AARO website....


"A fair bit of exaggeration," I wrote. For most (not all) U.S. citizens living overseas, tax filing involves substantially the same annual trip through TurboTax, TaxAct, or whatever (to deal with existing complexity), with Publication 54 explaining the few differences rather well. And it also involves not owing U.S. tax. Your description of your circumstances suggests you're like most Americans. Yes, it's annoying you have tax filings in two countries, but as compensation you get the option of taking what is probably America's most generous personal income tax break: the Foreign Earned Income Exclusion (and the Foreign Housing Exclusion). In simple terms, if you're a single filer living outside the U.S. and earn less than about $100K per year and receive no more than about $10K per year in interest, dividends, and capital gains, you're extremely unlikely to owe any U.S. personal income tax no matter which country you pick. (You might even be able to "bank" future reductions in your U.S. tax burden if you're paying comparatively high rates of non-U.S. income tax.) If you're going to have a citizen-based tax system, that's a rather good deal in my view. $100K is about twice the median total U.S. household income for reference.

And, on top of that, even if you screw up and don't file your personal income tax forms, there's no penalty for non-filing if you genuinely don't owe any U.S. tax. FBARs are another matter, but those filings are easy and not unique to those living overseas.

For a fairly small minority of Americans tax filing can get very complex, beyond what TurboTax, TaxAct, etc. can easily deal with. The biggest examples are starting a business and investing outside the U.S. You either have to be careful you know what you're doing or you can run into some "interesting" complexities. That's not most people, though. It is probably most of the people who fund lobbying groups.

U.S. personal tax filing is too complicated for nearly everyone, stipulated. You can blame Congress and the lobbyists that influence Congress, including Intuit's lobbyists. Members of Congress and the IRS would like to send most Americans pre-filled tax returns that many can just sign and return. Intuit doesn't like that idea and has spent millions trying to stop it.

Does getting PACS'ed get you a French work visa?

By the way, I see Nononymous suggested a "consultant" arrangement. The U.S. (IRS) side isn't particularly fussy about what arrangement you have. You can continue to be a regular employee, for example. It's a bit of a misconception that the U.S. requires a change in employment structure/arrangement when moving overseas. No, not as far as I'm aware. The foreign country (France) might want a different arrangement, such as some sort of registration in France and certainly tax payments in France, but those are French requirements.


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## BBCWatcher

Also, do you need a bank account in France anyway? If all your income is arriving in the form of U.S. dollars paid in the U.S., maybe/probably not. Low cost U.S. ATM/debit and credit cards may be all you need before you go.


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## danerly

Thanks, Bev. I'm not sure why I hadn't gotten an email alert, but I just now saw your response. Thanks for the helpful info!

I would be planning to visit the US with some degree of regularity to visit family, so I don't foresee having to come back to change visas as being a huge problem. But I will post to the France forum as well in the near future to see what others suggest.


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