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Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
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Experience:  Nearly 30 years of varied tax industry exp. Tax Biz owner
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I have RSU from the time I was working in France. They are

Customer Question

I have RSU from the time I was working in France. They are following the French tax rules and time constraints. They are managed by a US company.
I am now working in California, for the same company.
The RSU are now released, 2 years after I got them and I have to wait 2 years for being allowed to sell them.
Since they were released I paid the tax to US IRS.
my company is now asking me to settle an account in France, they will move the shares to this account.
Doing so I am afraid that I will have to pay the French tax in 2 years when selling them ( French tax rule, we pay the tax at he time of sale) despite the fact I already paid a tax here in the US.
What is your advice?
Thanks
Patrick
Submitted: 2 years ago.
Category: Tax
Expert:  Tax.appeal.168 replied 2 years ago.
Welcome, THANK YOU for using Just Answer. My goal is to help make your life...a little...LESS taxing.

Are you a resident of France, or the U.S.? Based on an amended France finance law in 2010, the following applies;


The acquisition gain arising from stock options (difference between the market value of the share at exercise and the exercise price) or RSUs (market value of the share at delivery) will now be subject, in the same way as employment income paid to nonresidents, to a mechanism of withholding tax when the beneficiary is a nonresident. François Baroin, the French Minister responsible for the Budget, stated that the new measure was “designed to improve the collection and control of tax and simplify reporting requirements for nonresidents”

Under current rules for French qualifying stock option and RSU plans, taxation is deferred until sale. The withholding will apply at the sale of the share. The person responsible for withholding and paying the tax will be the one that has released the funds to the beneficiary further to the sale (i.e., in most cases, this will be the financial intermediary that will have held the shares in custody). the withholding amount is 30%.

------------------------------------------

As there is a tax treaty between the U.S. and France that eliminates double taxation, you may be able to receive a credit for taxes paid in the country of your residency. Article 24 of the treaty references double taxation. I am checking the treaty and the technical explanations to see if there is a section that specifically relates to your matter. I will get back with you soon. Thank you for your patience.
Expert:  Tax.appeal.168 replied 2 years ago.
Link to full tax treaty:

http://www.irs.gov/pub/irs-trty/france.pdf

Expert:  Tax.appeal.168 replied 2 years ago.
Hello again Patrick,

I did not see any specific info in the treaty that references your situation, however, as mentioned in my previous response, Article 24 of the treaty addresses the elimination of the double taxation.

Thank you again for using JUST ANSWER.
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 2566
Experience: Nearly 30 years of varied tax industry exp. Tax Biz owner
Tax.appeal.168 and 2 other Tax Specialists are ready to help you
Customer: replied 2 years ago.
I am not sure you got my answer.
I am resident in the US.
Thank you
Expert:  Tax.appeal.168 replied 2 years ago.
Hello again,

Thank you for the accept, positive feedback, and bonus. Very generous of you. No, I had not rec'd your response about being a U.S. resident. As a U.S. resident, in order to claim the foreign tax credit, you will need to complete Form 1116 and include it with your 1040.

Link to Form/Instructions:

http://www.irs.gov/pub/irs-pdf/f1116.pdf
http://www.irs.gov/pub/irs-pdf/i1116.pdf

Paragraph 1 of Article 24 reads as follows:

(a) In accordance with the provisions and subject to the limitations of the law of the United States (as it may be amended from time to time without changing the general principle hereof), the United States shall allow to a citizen or a resident of the United States as a credit against the United States income tax:

(i) the French income tax paid by or on behalf of such citizen or resident;

-------------------------------------

Please let me know if I can be of further assistance to you regarding this matter.

Thank you again for using JUST ANSWER.
Customer: replied 2 years ago.
If I read well, I will pay the tax in France and ask IRS for a credit for the tax paid in France. correct ?

The tax I paid here is based on a share value that may be different at the moment of sales.
If it is higher at the time of sales, I will pay more in France than I had paid by anticipation in the US.
If it is lower, I would have paid more here than in France.
I guess IRS recalculates the tax based on the real value at sales time and makes corrections and then applies the credit.
Am I right ?
Is all of that included in the 1116 form ?

Thank you.
Expert:  Tax.appeal.168 replied 2 years ago.
Q: I guess IRS recalculates the tax based on the real value at sales time and makes corrections and then applies the credit.
Am I right ?


A: The amount of tax that you pay in France will be converted to U.S. dollars. Whatever that amount ends up being is what you will receive a credit for. Please allow me a few minutes to look over the Form 1116. I will get back with you soon. Thank you for your patience.
Expert:  Tax.appeal.168 replied 2 years ago.
Q: Is all of that included in the 1116 form ?

A: Yes, Part II of the Form 1116 relates to foreign taxes paid or accrued. You would record the amount in euros and in U.S. dollars in this section. Part III of the form is the section where you will actually figure the credit.
Customer: replied 2 years ago.
I think I had understood that.
My question was more about potential realignment of the tax I already paid to IRS.
In one case additional tax will be due, on the one, a refund will be use.
I just want to make sure to do the right thing .
Thanks
Customer: replied 2 years ago.
Anything else I should know about declaring to IRS the value of the shares at the time of sales ?
Thanks
Expert:  Tax.appeal.168 replied 2 years ago.
I apologize for misunderstanding what you were asking.

Q: In one case additional tax will be due, on the one, a refund will be use.

A: It is possible that more tax may be due to France than you paid to the U.S. The U.S. will not adjust the tax that you already paid to the U.S. because that was the amount of tax due at the time. As previously stated, whatever the amount of tax turns out to be that you pay to France will be credited back to you on your U.S. tax return. You will receive a credit for the taxes paid to France. If you paid more taxes to the U.S. than you will, or should receive a refund for the overpayment of those taxes paid to the U.S.

Please let me know if I answered your question.

-------------------------------

Q: Anything else I should know about declaring to IRS the value of the shares at the time of sales ?

A: Yes, if the sale results in a gain for you, you will need to report the gain amount on the Schedule D and possibly the Form 8949.

Link to Schedule D/instructions:

http://www.irs.gov/pub/irs-pdf/f1040sd.pdf
http://www.irs.gov/pub/irs-pdf/i1040sd.pdf

Link to Form 8949:

http://www.irs.gov/pub/irs-pdf/f8949.pdf


Expert:  Tax.appeal.168 replied 2 years ago.
Sorry, I inadvertently worded my last response incorrectly. When you sell the RSUs, you will report the sale on the Form 8949 and the Schedule D irregardless to if you incur a gain or a loss. If you incur a loss, you will be able to claim a maximum loss of up to $3,000 per year. If the loss amount exceeds $3,000, the remaining amount will carry over to future years until exhausted.
Customer: replied 2 years ago.
Thanks a lot
This is clear.
I think I got all I needed.
Patrick
Expert:  Tax.appeal.168 replied 2 years ago.
You are welcome Patrick. Have a good evening.

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