# Foreign accounts and taxes (forms 1040, 8938, Sch. B)



## michel.blanc (Sep 23, 2015)

Hello everyone,

I'm a French citizen working in the USA under a H1B visa.

I'm trying to figure my taxes, especially form 8938, as I do have, in France:

- Two checking accounts
- One saving account (Livret A)
- One brokerage account,

whose total exceeds the threshold for reporting.

I'm having a tough time figure out where and how to fill 8938 and other relevant forms.

Here are my questions:

1) In one of the checking account, I have wired a significant amount of money from my US accounts. This money are my savings accrued over the last 6 years from my job. So this is after tax dollars (converted to EUROS). This amount does not belong to any Tax Items as listed on Form 8938, Part III, is that correct? I'm mostly referring to "Other income" or "Gains (losses)". So basically, I need to just report the balance of that account and that's it?

2) I have transferred some of that wired money to my other checking account, not a problem, correct?

3) I also received a few checks from parents and grandmother, maybe about 1000 euros total, what do I need to do with that "income"?

Now for the brokerage account:

4) The "Gains (losses)"(form 8938 Part III) only apply if you sell stocks is that correct? If the value of the stocks increase during the year but you don't sell them, nothing has to be reported but the balance?

5) For dividends, the total is less than $1500 so I believe I don't need to fill Schedule B? But I still need to report them on form 1040?

6) How do I figure out the dividends and the french taxes I have paid on them? I just have statements every 3 months from my broker but I don't think I have an annual report or something that would look like a 1099. Am I supposed to do the math myself to compute the dividends and the taxes on it? Do I need to ask the broker special forms?

7) My grandmother donated (transferred) stocks to that same brokerage account. How do I deal with them? Is that an "Other Income"?

Help on any of these questions will be greatly appreciated!


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## Bevdeforges (Nov 16, 2007)

> Here are my questions:
> 
> 1) In one of the checking account, I have wired a significant amount of money from my US accounts. This money are my savings accrued over the last 6 years from my job. So this is after tax dollars (converted to EUROS). This amount does not belong to any Tax Items as listed on Form 8938, Part III, is that correct? I'm mostly referring to "Other income" or "Gains (losses)". So basically, I need to just report the balance of that account and that's it?


A simple transfer of balances does not count as income of any sort. Now, once those transferred funds start earning interest in the French accounts, that interest does have to be reported. 



> 2) I have transferred some of that wired money to my other checking account, not a problem, correct?


It should not be a problem, however don't forget that the wired money may be included twice in the high balance of both accounts (i.e. both the original account it was wired into, and then the checking account as part of the transfer). That's not a problem, as the high balances reported don't enter into any tax calculation.



> 3) I also received a few checks from parents and grandmother, maybe about 1000 euros total, what do I need to do with that "income"?


Gifts are not part of income and do not need to be reported.

OK, I'll let the folks with more experience guide you on the brokerage account - but I can give you a bit of info on your questions:


> 5) For dividends, the total is less than $1500 so I believe I don't need to fill Schedule B? But I still need to report them on form 1040?


You don't have to - but you need to submit Schedule B if only to check the box asking if you have any foreign financial accounts. As long as you are filing the form anyhow, it can be useful to use the Schedule B as a form to report the details of your dividend (and interest) payments. Aggregate them any way you want, but it makes a handy "sub-schedule".



> 6) How do I figure out the dividends and the french taxes I have paid on them? I just have statements every 3 months from my broker but I don't think I have an annual report or something that would look like a 1099. Am I supposed to do the math myself to compute the dividends and the taxes on it? Do I need to ask the broker special forms?


You add up the quarterly statements you get from the broker. If taxes were withheld, there may be some indication on the quarterly statements and you can use the withheld amount. If not, you can use your prior year's French avis d'imposition (because that will indicate the taxes you actually paid in 2015 - on income from 2014). 



> 7) My grandmother donated (transferred) stocks to that same brokerage account. How do I deal with them? Is that an "Other Income"?


Again, "gifts" are not considered income. The trick will be to have the brokerage adjust the donated stocks to their proper basis as of the date of gift so that they'll report the gains and losses correctly. (This can be done, as we had to do something like this when my husband inherited investments from his parents and merged them into his account.)
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

A couple more points:

(a) If you received a gift from a non-U.S. person then you may need to file IRS Form 3520.

(b) Foreign investment accounts/holdings might be Passive Foreign Investment Companies (PFICs) and/or foreign trusts. If the former it's generally wise to file IRS Form 8621 and make mark-to-market elections. If the latter then you'll need IRS Form 3520.


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## michel.blanc (Sep 23, 2015)

Thank you Bev and BBC for your great answers. I went deeply into my brokerage statements, and using the french IRS form "Délaration récapitulative des opérations sur valeurs mobilières et RCM", I was able to back-compute everything, i.e.:
- the gross amount
- the net amount (85% of gross, if foreign stocks)
- the income taxes (21% of gross)
- social security (CSG) (15.5% of gross)
- the broker fees (6% of net)
- the profit (gross minus all fees and taxes).

Now this is what I think I should do, please correct me if I'm wrong (and I probably am):

- File Form 8938 and report the dividends on Part III-1b.
- File Form Schedule B and report the dividends on Part II.
- File Form 1116:
- on Part I-1a, enter the gross amount of the dividends.
- on part II-k, enter the taxes withheld at source [QUESTION 1].
- File Form 1040 and report the foreign tax credit on line 48, add the Schedule B Parti II line 6 to 1040 line 9a

QUESTION 1: What are the taxes withheld at source? Is that the income taxes (21%) + social taxes (15.5%), or just the income taxes?

QUESTION 2: Is my game plan correct?

QUESTION 3: Is that even worth doing all of this? We are talking about less than 800 euros of net dividends (after taxes), for which taxes have already been withheld.

QUESTION 4: I'm not very good with how french stocks work but, there is this "Tax credit", that is equal to 15% of the gross value of the dividends, for US stocks only. Can I add that to the taxes withheld on form 1116? I'm sorry I know it's avery very specific question but I'll just try.

Any help is greatly appreciated.


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## michel.blanc (Sep 23, 2015)

Looking to other posts in this forum, it looks like the CSG does not qualify for tax credit. So should I just use the 21% income tax that was withheld, as a tax credit?

Thanks!


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## Bevdeforges (Nov 16, 2007)

I'm not sure what you mean by the 21% withholding, but you need to be sure that that is impots sur le revenu and not any other sort of tax. For US tax credit, only income tax can be credited against US tax due. Everything else is a possible deduction from the gross amount of the income (i.e. the "expenses" of making that income). 
Cheers,
Bev


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## michel.blanc (Sep 23, 2015)

Bevdeforges said:


> I'm not sure what you mean by the 21% withholding, but you need to be sure that that is impots sur le revenu and not any other sort of tax. For US tax credit, only income tax can be credited against US tax due. Everything else is a possible deduction from the gross amount of the income (i.e. the "expenses" of making that income).
> Cheers,
> Bev


Bev, 21% of income taxes are withheld on the dividends in France, I believe this is fairly new.

Source: https://www.bforbank.com/argent/fiscalite/actualites/2014-impot-dividendes.html

Can you explain how I reduce my income based on "everything else"? Do I subtract the CSG from the gross dividends? I'm really struggling to get these taxes done on time.

Thanks!


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## Bevdeforges (Nov 16, 2007)

Not owning any stocks, I can't really tell you much about how dividends are treated in France. But given that the 21% withheld really is income tax, then you need to report the dividends "gross" (i.e. with the withholdings added back to the amount you actually received), and the amount withheld becomes your "foreign tax" for use on the 1116 form, claiming the tax credit against whatever taxes your French dividends generate on your US forms. 

Are you trying to figure your taxes "by hand" or are you using one of the tax preparation programs? Because foreign dividends with foreign income taxes paid/withheld are pretty common, even for those with US brokerage accounts and should be fairly easy to report using tax prep software. Or perhaps we can flag down someone here with experience reporting dividends....
Cheers,
Bev


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## michel.blanc (Sep 23, 2015)

Bevdeforges said:


> Not owning any stocks, I can't really tell you much about how dividends are treated in France. But given that the 21% withheld really is income tax, then you need to report the dividends "gross" (i.e. with the withholdings added back to the amount you actually received), and the amount withheld becomes your "foreign tax" for use on the 1116 form, claiming the tax credit against whatever taxes your French dividends generate on your US forms.
> 
> Are you trying to figure your taxes "by hand" or are you using one of the tax preparation programs? Because foreign dividends with foreign income taxes paid/withheld are pretty common, even for those with US brokerage accounts and should be fairly easy to report using tax prep software. Or perhaps we can flag down someone here with experience reporting dividends....
> Cheers,
> Bev


I'm trying both by hand or with TurboTax. But TurboTax keeps thinking I got a 1099-DIV from this french broker, which I obviously didn't get. 

So you think I should get the net amount I received, add back the 21% income tax and report that as gross? The problem is that number doesn't not exist anywhere. On the summary sheet I got, there is the total gross amount and the 21% amount withheld, that's it.


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## Bevdeforges (Nov 16, 2007)

The number you report doesn't have to exist anywhere. If you have to "gross it up" then that's what you do.

On the 1099's, you don't submit them with your returns, so you can dummy up a substitute, using the gross (brutto) amount of the dividend, and then filling in the amount already paid (i.e. withheld) and let TurboTax put that information where it will.
Cheers,
Bev


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