‘Accidental Americans’ living abroad fight tax bill from Uncle Sam

[Amica Nostra 4,803]

https://www.nbcnews.com/nightly-news/accidental-americans-living-abroad-fight-tax-bill-uncle-sam-n867711

 

PARIS — Tom Wallis was born here and has spent his entire life in France, but it turns out that the 40-year-old entrepreneur from Grenoble owes tens of thousands of dollars in taxes to the United States.

Wallis' mother was French, but he holds U.S. citizenship through his American father. He had previously visited his father's family in the U.S., but other than that he says he has no real connection to the country.

But three years ago, Wallis found out he was still subject to U.S. tax law.

 

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 'Accidental Americans' push back on paying U.S. taxes 1:50

He is one of potentially thousands of "accidental Americans" around the world — U.S. citizens who neither live in the country nor have any real ties to the United States.

Under a citizenship-based taxation system in place in the United States, people like Wallis are subject to U.S. taxes on their global income, no matter where they live.

Wallis hired lawyers to fill out the necessary paperwork to try to comply with the U.S. tax authority, but when his legal fees reached over $61,000 (50,000 euros), he says he had to stop the process. "It was too much," he said.

His lawyers told him he would owe $115,000 in U.S. taxes after he sold his business in 2013, even though he had paid a tax on the sale in France. He says he won't pay even though the U.S. has not explicitly asked him for any money yet.

"There is no way," Wallis said, adding that it's money he could invest in France, where his family lives. "I am OK to pay what I owe in France, but to the U.S. — I can't accept it ... I think it's a robbery."

He says he doesn't know what will happen next, but he won't be hiding from the authorities, because he feels that he has done nothing wrong.

"I won't pay. Even if I have to go to jail, I won't pay it for sure because it's too unfair."

 

[article edited by VJ Moderation to comply with Fair Use]

Edited April 23, 2018 by TBoneTX
shortened to comply with Fair Use

[bcking 3,157]

I didn't realize the process of being a US citizen was "automatic" if you were born abroad with a US Citizen parent. I figured it was guaranteed but you still had to apply for your infant to receive a citizenship.

 

Now that he is in this situation I agree it's ridiculous for him to be expected to pay taxes to a country he has never lived in and doesn't plan to live in. If he is a French citizen I guess he could renounce his US citizenship to cut the tax burden ties?

 

This is why my wife has no plans on becoming a citizen. She is quite happy with a green card. She'll pay taxes when she lives here but if we ever move back to the United Kingdom she doesn't want to have to keep paying taxes to a country she isn't living in. I'll have to deal with it. One is enough for us.

[charmander 692]

2 minutes ago, bcking said:

I didn't realize the process of being a US citizen was "automatic" if you were born abroad with a US Citizen parent. I figured it was guaranteed but you still had to apply for your infant to receive a citizenship.

 

You're right, it is not. His father probably took care of CRBA long time ago.

 

As far as I know, renunciation of US citizenship is not a complicated process. It'd still cost him little over $2,000 and a visit to the US consulate but he won't have to deal with this tax issue again.

 

[charmander 692]

In general, these kind of accidental dual-citizenships could hurt the child unless the parent does his/her job and inform the child about the requirements.

 

Around year 2036 my son may hate me for getting him Turkish citizenship. Male citizens still have a mandatory military service requirement. When he turns 18 years old, he will have to deal with the paperwork and such. I hope I'm still around by then to help him thru the process.

[Dashinka 24,492]

1 hour ago, charmander said:

In general, these kind of accidental dual-citizenships could hurt the child unless the parent does his/her job and inform the child about the requirements.

 

Around year 2036 my son may hate me for getting him Turkish citizenship. Male citizens still have a mandatory military service requirement. When he turns 18 years old, he will have to deal with the paperwork and such. I hope I'm still around by then to help him thru the process.

There are a lot of countries with this stipulation (compulsory military service).  I know several friends from Korea that were expating here in the US when they had a son (most of these military service countries only impact males for some reason).  At 18, the person will need to decide.

[bcking 3,157]

My friend who is a US/Israeli dual citizen got stuck on one visit to family in Israel because after he arrived at the airport he was somehow flagged because he hadn't done his compulsory service. They didn't officially arrest him but they basically did. He was taken from the airport, and wasn't going to be allowed to leave. This was only like a month before starting medical school.

 

Fortunately his father had connections in the government and they left him go. He didn't visit again for several years until he was past the required age (or something like that, I forget the details).

 

I'm perfectly happy paying taxes but I don't see why someone who isn't going to benefit at all from the taxes (they are living abroad) should be subject to them. If you establish your permanent resident status elsewhere you shouldn't have to keep paying US taxes. Or they should create some "secondary status" where you are an "inactive citizen" or something so that if you ever choose to return you can be reactivated, but while you are gone you don't have to pay. Before anyone asks - I also don't think you should be voting in elections if you don't live here.

[Dashinka 24,492]

Interesting, this act was passed by the 2010 congress, who was in control of Congress back then?

[charmander 692]

21 minutes ago, bcking said:

I'm perfectly happy paying taxes but I don't see why someone who isn't going to benefit at all from the taxes (they are living abroad) should be subject to them. If you establish your permanent resident status elsewhere you shouldn't have to keep paying US taxes. Or they should create some "secondary status" where you are an "inactive citizen" or something so that if you ever choose to return you can be reactivated, but while you are gone you don't have to pay. Before anyone asks - I also don't think you should be voting in elections if you don't live here.

As much as I find birthright citizenship weird, this is also weird. You shouldn't punish your citizens who earn their living abroad. I understand there are generous exclusion limits ($100K or so) but still. I am not sure how much it is to do with this but number of expats renouncing their citizenship is rising.

 

 

[bcking 3,157]

1 minute ago, charmander said:

As much as I find birthright citizenship weird, this is also weird. You shouldn't punish your citizens who earn their living abroad. I understand there are generous exclusion limits ($100K or so) but still. I am not sure how much it is to do with this but number of expats renouncing their citizenship is rising.

 

 

If my wife and I planned a move back to the UK I would consider renouncing my citizenship once I was established there, assuming nothing major changes after Brexit. I imagine it will always be quite easy to visit the USA from the UK .

 

I have no problem maintaining dual citizenship...I just don't want to have to pay for services and benefits that I'm not getting. I also wouldn't feel like I had the right to vote so I would abstain from that. At that point I would be paying taxes just to hold the passport and honestly a UK passport is "better" when it comes to travelling places. 

[charmander 692]

40 minutes ago, Bill & Katya said:

There are a lot of countries with this stipulation (compulsory military service).  I know several friends from Korea that were expating here in the US when they had a son (most of these military service countries only impact males for some reason).  At 18, the person will need to decide.

They changed the law so that it is now much easier for expats to deal with this. You pay a 1000 euro fee and they send your discharge papers in the mail. It used to be 5x more expensive and you still had to attend a three-week long basic training (that's what I did).

 

I predict they'll abolish conscription in near future but it is still a political debate.

 

[bcking 3,157]

21 minutes ago, Bill & Katya said:

Interesting, this act was passed by the 2010 congress, who was in control of Congress back then?

I have no problem "going after" people who keep their assets abroad but continue to maintain residence in the USA. 

 

The "loophole" is in people like this guy who hold no residence, don't vote, have no ties to the USA, would essentially be a "tourist" here and yet have to pay taxes.

 

If you want to benefit from being a US citizen then you shouldn't be able to hide your money elsewhere.  But if you want to move and make an income and live a life in another country, you shouldn't have to completely "renounce" citizenship. There should be some middle ground.

[Dashinka 24,492]

1 hour ago, bcking said:

I have no problem "going after" people who keep their assets abroad but continue to maintain residence in the USA. 

 

The "loophole" is in people like this guy who hold no residence, don't vote, have no ties to the USA, would essentially be a "tourist" here and yet have to pay taxes.

 

If you want to benefit from being a US citizen then you shouldn't be able to hide your money elsewhere.  But if you want to move and make an income and live a life in another country, you shouldn't have to completely "renounce" citizenship. There should be some middle ground.

I don’t disagree, and honestly, citizenship taxation is wrong.  I was simply pointing out the unintended consequences of what was most likely a hastily crafted bill that “taxes” the rich.  I wonder why Obama didn’t use his prosecutorial discretion relative to going after these accidental Americans?