Getting paid abroad: legalities and effects
Thread poster: Patricia Lane

Patricia Lane  Identity Verified
France
Local time: 11:02
French to English
+ ...
Oct 17, 2006

Hello all,

To set the context, I live in France, am a dual national and file taxes both in the US and here.

Up to now, I guess I have been fortunate in that overseas clients have not quipped about my payment terms that are by wire in Euros net of all bank and forex charges.

Now, I have a prospect in the US that in all likelihood would turn into a regular customer but their payment policies leave all charges up to me. To wit:
- by check in USD (double whammy with my bank in France both for depositing a non EU check and currency conversion)
- they claim paypal for non US residents are no charge but I think that just means THEY don't charge for that means of payment as they charge 10 USD for payment by moneybookers
- any other means are at full charge to the service provider (ie, a wire is at minimum 50 USD to send + they leave the local bank charges and forex costs to me).

That ads up to a tidy sum off each invoice and I am not willing to go that route.

On the other hand, I still have a personal account in the US that could, if the client were willing, receive those payments.

My question is two-fold:
1. I suppose on the French end it would be OK provided I recorded the income in Euros calculated on the date the payment was received, but confirmation of that assumption would be good.
2. On the US end, would the tax folks balk at my receiving a payment in the US for work performed abroad? What consequences if any would derive from this particularly if it became a regular pattern?

Have any of you worked this way? Have you encountered any difficulties? Your advice and experience would be appreciated.

Thanks.

Patricia


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French Foodie  Identity Verified
Local time: 11:02
French to English
+ ...
My experience Oct 17, 2006

Hi Patricia,

I can't help you on the US end of things, but I can tell you my experience here in France. I am a Canadian citizen, but live in France. As I am no longer considered a Canadian resident, I only pay taxes in France, so my situation is not exactly like yours. I do, however, still have a Canadian bank account to make my monthly student loan payments (sigh) and because it simplifies things when I travel back to visit friends and family. I also receive a few payments to that account from North American clients for the financial reasons you state above. My accountant here says that this is not a problem, as long as the payments are recorded in my accounting books and thus I pay French tax on them accordingly (Canada and France have a tax agreement, you might want to check out whether the US and France have a similar one). Due to this same tax agreement, there is no problem on the Canadian end, as long as I can prove that I am paying French tax on the income.

Do you have an accountant? Or are you a member of an AGA? (If not, I would highly advise it for the 20% tax allowance.) I would suggest making an appointment with your AGA to find out about the French side of things, and contacting the international tax bureau (through the US embassy no doubt) for info on the US side of things. That way, you will know for sure and will (hopefully) have fewer headaches.

HTH
Mara

[Edited at 2006-10-17 08:28]


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Patricia Lane  Identity Verified
France
Local time: 11:02
French to English
+ ...
TOPIC STARTER
thanks mara Oct 17, 2006

for your response.

Yes, indeed, I am a member of AGA and am pretty clear on the French side of dealing with an eventual overseas payment.

For my comfort, I just need to firm up the US side.

Lucky you! Even though a Canadian national, you no longer have to file taxes as a non-res! US law is a lot stricter, sigh.

Patricia


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Kelly O'Connor  Identity Verified
United States
Local time: 05:02
Italian to English
it doesn't matter where you are paid ... Oct 22, 2006

Patricia Lane wrote:

for your response.

Yes, indeed, I am a member of AGA and am pretty clear on the French side of dealing with an eventual overseas payment.

For my comfort, I just need to firm up the US side.

Lucky you! Even though a Canadian national, you no longer have to file taxes as a non-res! US law is a lot stricter, sigh.

Patricia


the IRS doesn't care where or how you are paid, as long as the money is earned abroad:

see
www.irs.gov/businesses/small/international/article/0,,id=96811,00.html

"Source of Earned Income

The source of your earned income is the place where you perform the services for which you received the income. Foreign earned income is income you receive for performing personal services in a foreign country. Where or how you are paid has no effect on the source of the income. For example, income you receive for work done in France is income from a foreign source even if the income is paid directly to your bank account in the United States and your employer is located in New York City."

[Edited at 2006-10-22 07:24]


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Patricia Lane  Identity Verified
France
Local time: 11:02
French to English
+ ...
TOPIC STARTER
Many thanks Oct 22, 2006

Kelly, for your reply. That does indeed put my mind to rest.

Kind regards,

Patricia


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archtrans  Identity Verified
Canada
Member (2006)
German to English
+ ...
The IRS does care where you earn your income if you live abroad Dec 16, 2006

I know this thread is from October but I wanted to just point this out:

The IRS only cares if you make an income over a certain amount when living abroad. Currently, to the extent that you live abroad for the tax year (there are two ways to count that up), and if you earn less than $70,000, you don't pay any taxes on your foreign-earned income. It is pro-rated if you split your time between two countries.
Of course there is FDIC (social security) to worry about. But when I was living in Germany, technically I did not have to pay that either: I don't remember exactly but I believe I submitted a statement to the effect that I came under the regs of the German system. Of course that meant I did not pay any social security there either, because I was a free-lancer, but the IRS did not concern itself after that.


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Kelly O'Connor  Identity Verified
United States
Local time: 05:02
Italian to English
Well, that's partly right Mar 16, 2007

Francesca Rogier wrote:
The IRS only cares if you make an income over a certain amount when living abroad. Currently, to the extent that you live abroad for the tax year (there are two ways to count that up), and if you earn less than $70,000, you don't pay any taxes on your foreign-earned income.



The current limit is $ 82,000 I believe, which is after deducting all business expenses and your standard exemption.

Francesca Rogier wrote:

It is pro-rated if you split your time between two countries.
Of course there is FDIC (social security) to worry about. But when I was living in Germany, technically I did not have to pay that either: I don't remember exactly but I believe I submitted a statement to the effect that I came under the regs of the German system. Of course that meant I did not pay any social security there either, because I was a free-lancer, but the IRS did not concern itself after that.



That would be FICA, or self-employment taxes which are not payable to the US if the self-employed person resides in countries where the US has a Totalization agreement (which includes France in Patricia's case). I wonder how you got around paying SS in your country of residence, though. Seems that you got lucky and somehow slipped through the cracks, because AFAIK, you have to pay it in one country or the other.

K


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