Immigration, Life in Paris, Money

Tax Trauma – French Edition

In getting ready for my developing visa situation and my application to naturalise, I need to declare my financial situation for 2015, 2016, and later, 2017.

This is a really normal thing, and France make it quite easy, but somehow I still wound up falling into an 8 hour confusion spiral. Everything is fine, but here’s what happened.

On Wednesday, I went down the street to the office of public finances. I arrived around 9am, just after the office opened, and braced for the crowds and the queues. To my complete surprise, there was almost no one there! There was literally one other woman waiting for an appointment, and I didn’t even need an appointment! Bureaucratic bliss!

I went up to the front desk, explained that I was a student and I wanted to declare my financial situation for 2015. The woman at the desk immediately selected form 2042, a first declaration of revenue or a paper declaration of revenue for those without an internet connection.

Form 2042 is very simple for students, especially foreigners. It’s the first declaration of revenue, and after it is processed I will receive my official French tax number. This number will allow me to fill in my declarations for the coming years online.

On the 2042, you write your name, French address, and how you can be contacted, and then submit the form with a copy of your rental agreement.

The woman highlighted the sections I needed to fill out, and told me to come back as soon as I could in April to get the form for 2016. As the 2015 form won’t be processed before then, I won’t have my tax number until this fall, and will simply have to do another paper declaration for 2016.

Easy right?

It should have been! But I somehow got in my own way. As I practically skipped home from the office, I realised that as part of my visa agreement, I’m obligated to have a certain amount of money per year to support my studies. Did I have to declare that? If I didn’t declare it, could this raise questions as to whether or not I upheld the conditions of my visa?

I made a cup of tea, tried to Google the answer, and quickly decided to go back to the office and ask.

The same very nice woman gave me a ticket for an appointment, and within a few minutes I was in a back office asking my questions. I brought with me this time the copy of the contract that I terminated at the end of February, 2015, and asked about how to report that income, and if it was different than my student budget. According to the man in the office, the money from my American resources is reported as a “pension alimentaire” and he highlighted the section for me to report the sum total of anything I had received in 2015.

I went home again, and then things got rough. As I pulled out the bank statements that I had from April 2015 (when I opened my bank account) to December 2015, and did my best to add up the numbers. Somewhere along the line, I had cut out my RIB (the routing identity information) to use, presumably for school and for setting up my automatic payments, but in doing so managed to cut out some of the deposits that I made.

I did my best to add things up correctly, and even overestimated a little to compensate for any error I may have made due to the missing information. I checked my American accounts to see if they could make up the difference, but I only have records of the transfers, not the cash or checks from my family, so it didn’t shed any light on the situation.

I looked at the slightly overestimated total, plus the money from my contract, and panicked. I had transferred enough money to pay my school fees and my legal minimum obligations, plus enough to actually pay rent and eat reasonably well, and this seemed to place me in the 15% tax bracket for 2015. It would not have been the case for 2016, but the lower limit for 2015 was just that, lower. Instead of going back to the office for a third time, I had to go off to school and to my internship, so I wrote the number down in my Filofax and worried.

During the day, I crowdsourced some information from French friends and associates. Was it essential to report pension alimentaire as a foreigner, as no one was claiming a French tax deduction for it? Was it tax fraud if you didn’t have enough information about your revenue? Would my naturalisation paperwork be thrown into the bin and set on fire if a mistake was uncovered on my tax form???

I received various responses. No, I ought not to report anything at all, I was a foreign student and it didn’t matter. Yes, I ought to try and report the pension alimentaire but not the contract money, or the other way around, or yes, report everything and if I am taxed go and see about a payment plan.

A diversity of opinions rolled in, and I felt very adrift in a sea of advice. Thinking I was facing about 1,500€ in taxes, I called my parents to ask if they would be able to help me pay it if there was a time limit, for as you may have guessed, I do not have 1,500€ at the ready.

Finally, emotionally drained but still upright, I met up with an American friend and made it an admirable 20 minutes into our conversation before spewing my story onto the table.

At the end of my tax-fuelled tirade, she cocked her head and asked, “How much money could you have possibly received in 2015 to owe 1,500€?” I told her.

She blinked at me, I blinked at her, and she replied, gently, “You know, don’t you, that you only pay taxes on the money earned above and beyond the start of the tax threshold…”

I, dear reader, did not.

In all of my concern, I never stopped for a moment to literally sit and think about how taxes at the bottom of the tax brackets work. I know, like most people, that if you earn below a certain amount of money then you pay 0% in taxes, and you may even receive transfers like housing credits, etc. from the government. Similarly, once you make a certain amount of money, you pay a certain percentage of your taxes (like 14%).

Simple.

But I had never stopped to consider the margins, and to consider what portion of your income was actually taxed.

For example, the French tax bands for 2015 are :

Tax Band : Rate

Up to €9,690 :  0 %

€9,691 to €26,764 : 14 %

€27,765 to €71,754  : 30 %

€71,755 to €151,956 : 41 %

In transferring just over 10,000€ in the course of the year, I thought I would have to pay 14% of that amount in taxes, or about 1,500€.

What actually happens is that you take the money you brought in (say, about 10,600€) and instead of just multiplying that by 0.14 and writing a cheque, you instead subtract that total from the number that makes up the threshold for the tax band (9,691€). That difference, or about 909€, is what you brought in over the 0% tax brand. That is what you would be taxed on, and at the rate of 14%, you’d wind up paying about 127€, not 1,500€…

Every day is a school day!

To confirm my friend’s advice, I searched until I found the online simulator for French taxes from 2015 . I filled in the correct boxes (again with just a little over-estimation), clicked submit, and scrolled through the results.

The total amount of taxes owed?

0.00€

I refreshed the screen and filled in the form again.

0.00€

All this drama, a whole day of thinking everything was over, forever, to see 0.00€ at the end of the form. Could the simulator be off? Sure… but… it looks identical to the tax form sitting on my desk, and these tools tend to work, especially in a situation like mine that is relatively simple.

I’m going in to turn in my form on Monday, relieved to have done it, embarrassed by how hard I made it for myself, but happy to know that I’ll be able to declare my financial situation like any average citizen, and get started on this next step to full-fledged participation in French society!

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