American in France — a PEA and an assurance-vie

Facts

• US citizen, living in France.
• US filings: I'm up to date.
• Income: self-employment or freelance, dividends or interest.
• Non-US accounts at their peak: $50,000 – $200,000.
• Non-US funds or ETFs: yes, 4 to 10 — I received distributions this year.
• Foreign company interest: yes, between 10% and 50%.

What they hold

• PEA holding funds
• Assurance-vie with a fund allocation
• Minority share in a French SARL

Potential issues

• FBAR (FinCEN Form 114)Likely

  An FBAR is required when the aggregate value of your non-US financial accounts exceeded $10,000 at any point during the calendar year. It is filed with FinCEN, separately from your tax return.

• FATCA (Form 8938)Possible

  Form 8938 reports specified foreign financial assets and is filed WITH your tax return. Its thresholds are much higher than the FBAR's, and higher again if you live abroad.

• Foreign investments / PFIC (Form 8621)Likely

  Almost every fund organised outside the US — a UCITS ETF, a local mutual fund, many insurance-wrapped investments — is a passive foreign investment company for a US owner, and generally needs its own Form 8621 each year.

• Foreign pensionsNot currently indicated

  A non-US pension is generally a specified foreign financial asset for Form 8938, is often a reportable account for the FBAR, can be a foreign trust for Form 3520 unless an exemption applies, and its contributions and growth may be taxable in the US each year unless a treaty article defers them.

• Foreign companies, partnerships, branches and trustsLikely

  Foreign corporation reporting (Form 5471): A holding of 10% or more in a non-US corporation generally puts you in one of the Form 5471 filing categories. The form is due with your return, and the penalty regime treats a late or incomplete form as a failure to file.

Likely forms

• US federal tax return (Form 1040)Likely

  Net self-employment earnings of $400 or more create a filing requirement on their own, regardless of the standard deduction.

  Sources: IRC §6012 · IRS · US citizens and resident aliens abroad · IRS Publication 54 · Publication 501

• FBAR (FinCEN Form 114)Likely

  Your combined non-US account peak ($50,000 – $200,000) is above the $10,000 aggregate threshold.

  Sources: 31 U.S.C. §5314 · 31 CFR §1010.350 · FinCEN Form 114 (FBAR)

• PFIC reporting (Form 8621)Likely

  You hold funds or ETFs organised outside the US. PFIC status turns on where the fund is organised, not on what it holds — an Ireland-domiciled ETF tracking the S&P 500 is still a PFIC.

  Sources: IRC §1297 · IRC §1291 · IRS Form 8621

• Foreign corporation reporting (Form 5471)Likely

  A holding of 10% or more in a non-US corporation generally puts you in one of the Form 5471 filing categories.

  Sources: IRC §6038 · Form 5471

• FATCA Form 8938Possible

  Living abroad and filing as one person, your Form 8938 thresholds are $200,000 at year end or $300,000 at any time during the year.

  Sources: IRC §6038D · IRS Form 8938 · IRS · Form 8938 basic questions

• Foreign branch / disregarded entity (Form 8858)Possible

  You have self-employment or business income abroad. Operating in your own name outside the US is generally a foreign branch, and the branch has its own information return separate from Schedule C.

  Sources: Form 8858 · IRC §6038

• Self-employment tax (Schedule SE)Possible

  Self-employment income is subject to 15.3% US self-employment tax from the first $400 of net earnings.

  Sources: IRC §1401 · IRS Form 2555

• Foreign Earned Income Exclusion (Form 2555)Possible

  You have foreign earned income and live abroad, so the exclusion is likely available to you.

  Sources: IRC §911 · IRS Form 2555

• Foreign Tax Credit (Form 1116)Possible

  You paid income tax to another country, so the credit is likely the mechanism that stops the same income being taxed twice.

  Sources: IRC §901 · IRC §904 · IRS Form 1116

Likely · Possible · Needs review — likelihoods on the stated facts, never determinations.

What depends on more information

• ○Your specified foreign financial asset total on the last day of the year, and its highest point during the year, against $200,000 / $300,000.
• ○Whether your activity abroad is a trade or business for US purposes, and how any entity you use is classified.
• ○Whether you are covered by the French social security system and can obtain a certificate of coverage.

Atamatax workflow

1. 01Gather the prior US returns you have and the local tax records for each year in scope.
2. 02Build the account list with each account's highest balance during the year — this feeds both the FBAR and Form 8938 and is the item most people underestimate.
3. 03Export brokerage statements for every year each fund was held and list each fund's ISIN; establish which holdings are PFICs before any return is prepared.
4. 04Assemble the entity or trust documents: ownership percentages, financial statements, or the trust deed and gift details.
5. 05Decide between the Foreign Earned Income Exclusion and the Foreign Tax Credit before preparing the earliest year — the choice is hard to reverse and applies year on year.
6. 06Prepare the return with its information forms, then file the FBAR separately with FinCEN — they go to different agencies with different deadlines.

Needs a professional's judgement: FEIE versus Foreign Tax Credit: the election is hard to reverse and depends on figures this assessment did not ask for.