Working freelance in foreign country, but paid in the US (maybe) ~ what do I need to do to pay US taxes?

Question

I'm a US citizen living temporarily in France under a student visa. I got an offer recently to work for a translation agency based in France ~ it is at-home work, paid by word/project. If this were salaried employment, I'd pay taxes to the French govt, file a US income tax form and get a credit for the French taxes (and most likely pay no US taxes, as a result). But this is freelance. In general, freelancers need to get a work permit/carte de sejour to conduct business in France, but I'm not looking to set up my own business. I just want to work a little in my free time (I'm a full time student). I've met people who work outside the US, sometimes months at a time, but they always declare income/pay taxes to the US, not the country they're visiting. Even though I have the added factor of temporary residency in France, I think I should still be able to do the same. Is this the case? And if so, what hoops do I have to jump thru? Like do I have to get paid into my US bank account?

Thanks for the responses so far... to clarify, I live in France and when I start working, it will be IN France. But I WANT to declare income to the US govt. Not only because I'd pay less in tax but also because of the carte de sejour issue I mentioned. I don't think the issue is as simple as "you pay tax to the country where the work takes place" because of the friends' situation I mentioned. This is actually more of a French tax law question than a US one - it's the French taxes I won't be paying - but I would like a US perspective on this as well....

Answer 1

As you are a US citizen you report your worldwide income. It is likely you will not owe any US taxes. Look at the instructions to form 2555 which allows you to exclude about 80,000 of income plus an additional amount for housing under section 911. The forms can be overwhelming - I suggest speaking to a pro that has experience in the area of expat taxation.

Answer 2

You will have to get the carte de sejour and pay the French taxes. There's no way around that legally and you risk deportation if you don't follow French employment law.

You'll still have to claim this income on your US return as well. You may be eligible for either the Foreign Earned Income Exclusion or the Foreign Income Tax Credit. If eligible for both you can file which ever way results in the lowest tax for you.

Get a copy of IRS Pub 54 from the IRS website.

Answer 3

The US and other countries have tax treaties that address these issues. The theory is that the average person will pay the highest amount of taxes for either country. For example if you work in the UK you will pay taxes to the UK and normally those taxes are greater than those you would pay in the US so you do not have to pay taxes in the US. Switzerland on the other hand has lower taxes. You would pay the Swiss government their share and deduct that amount from what you would pay in the US, paying the difference to the IRS. You still have to file a tax return no matter where you work.

Answer 4

If you are paid in the US then the company who pays you should figure out the exchange and deliver a W2 or 1099 to you at the beginning of '08. You can file your taxes online so don't even think about making any excuses up!

Answer 5

This is a question I would run by the IRS. I believe that if the work is performed in the U.S. then taxes must be paid here, regardless of where the company is located. When you live and work abroad, there is an income exemption. I doubt that this applies when you are living and working in the U.S.