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Wondering what it’s like to file your taxes in France? Here’s how filing taxes in France compares to doing your tax declaration in the United States.
Note: France has a reputation for a complex tax system. In part, this is because there are a lot of different types of taxes that exist in France. For this article, we are just comparing filing an annual tax declaration for personal income.
1. Tax Filing Process
There’s an online platform for filing taxes in France. It is a national system run by the government, so everyone in France uses it. In fact, it’s obligatory to do your declaration electronically although there are exceptions. For example, the first time you complete your tax declaration in France, if you do not yet have a numéro fiscal (tax identification number), you’ll likely need to fill out a paper tax declaration.
It’s possible to file taxes electronically in the United States. However, a national platform that allows all taxpayers to directly file their taxes with the government does not exist. The IRS Free File program is a service that allows taxpayers to e-file their federal income tax returns. Under a certain income threshold, eligible taxpayers can use a guided software for free through a trusted partner. Few of these partners accept foreign addresses, leaving out Americans abroad. Above the income threshold, eligible taxpayers can still use the free fillable forms but they need to “do the work” as stated on the IRS website.
The IRS has recently piloted DirectFile. Currently available only for those living and working in 25 participating states, Americans abroad are not eligible to use this tool. DirectFile comes with several other limitations regarding income, credits, and deductions. Even in the states where it is available, not all taxpayers are eligible.
2. Tax Filing Complexity
After you’ve filed your taxes for the first time in France, the subsequent years are easier. This is because a lot of information is already prepopulated. You aren’t guessing what you owe or responsible for running your own calculations. Few deductibles exist. When you update your familial situation (single, married/PACS, children) through the portal, the appropriate rates are selected for you. Of course, you do need to make sure you include all income and earnings in the right spaces, and there might be some extra forms to fill out. By and large, however, personal income tax declarations in France are not particularly complex.
In the United States, there’s a lot of stress and anxiety around filing taxes. American taxpayers scramble yearly to gather all their paperwork: income information, bank and mortgage statements, medical costs, donation receipts, etc. Forms are complicated and the directions included are not written simply. There’s fear of getting it wrong coupled with fear of missing out on significant tax reductions, credits, and exemptions. From knowing which forms you need to include to calculating how much you owe, everything has to be figured out yourself. Tax compliance in the United States is onerous.
As a special bonus, the United States is one of few countries to tax based on citizenship as opposed to residency. This means that even American citizens living abroad are expected to file their annual tax returns. As you might imagine, filing taxes when living and working in another country adds a whole other layer of complexity (and cost).
3. Tax Filing Costs
The process of filing taxes in France is free. Ok, yes—the taxes cost money, but there are no costs on top of the taxes themselves. Since the declaration is relatively straightforward, most people do not engage a tax preparation service for help. As one might expect, businesses employ accountants but when it comes to personal income declarations, the average French resident is logging into the portal and doing it themselves.
On the other hand, tax preparation is a major business in the United States. As already mentioned, eligibility for the free online software through the government is restricted. Therefore, the choice is between filling out complex forms and doing the math yourself (OMG, no thank you) or paying for a software or service. Americans commonly spend hundreds of dollars annually on top of the taxes themselves. Software that accommodates the unique situation of expat tax filing often comes at a higher price tag. The commercial tax preparation industry is clearly doing very well for themselves…
