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'Accidental Americans' living abroad fight tax bill from Uncle Sam

Born in the U.S., they might have never lived in the United States as adults but now they are required to pay back taxes — and claiming it's unfair.

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.

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."

There has been a growing movement by "accidental Americans," particularly in France, to try to get U.S. authorities to realize the burden their American citizenship is adding to their lives. Many are hoping that French President Emmanuel Macron will raise the issue during his state visit to the U.S. this week.

Unlike other advanced nations, the United States enforces a tax system based on citizenship rather than residency. In 2010, Congress enacted the Foreign Account Tax Compliance Act, also known as FATCA, to crack down on tax evasion by Americans with financial assets abroad after a Swiss bank scandal showed U.S. taxpayers hid millions of dollars overseas. The law requires foreign banks to report about financial accounts held by U.S. citizens to the Internal Revenue Service (IRS) in the United States.

As a result, many "accidental Americans" learned they may owe taxes in the United States after getting contacted by the banks in their home countries.

Fabien Lehagre, 33, a commercial manager, found himself in that exact situation.

Born in Mountain View, California, in 1984 to a French father and a Singaporean-American mother, Lehagre was 2 when his parents divorced and he and his father moved to France.

He grew up and studied there, and now works in Paris.

Image: Fabien Lehagre
Fabien Lehagre, president of Accidental Americans Association, hopes French President Emmanuel Macron will raise the issue with U.S. officials on his visit to the country this week.Courtesy of Fabien Lehagre

In 2014, his French bank contacted him asking for his U.S. tax identification number. Thinking it was a mistake, Lehagre ignored the request despite repeated warnings. The requests didn't stop.

He did some research and discovered that he was also an "accidental American" and could face a looming tax bill from the United States.

Lehagre, who doesn't speak English, says although he has only lived in the United States for a short time as a toddler,never studied there, voted or paid taxes, he was being "forced into the administrative system that obliges [him] to fill out forms, pay a lawyer and have [his] bank accounts scrutinized."

Rescinding his U.S. citizenship would cost Lehagre more than $3,000 on top of the legal and accounting fees to start the procedure.

Faced with a prospect of a significant financial strain, Lehagre is considering his options and hoping someone in the United States will awaken to the plight of the thousands of people like him.

Mojgan Ghanipour, a tax accountant from San Francisco who has been working in France on and off since 1989, has advised many such clients.

Ghanipour says even if they don't end up paying the taxes they may owe to the United States, taking care of even the simplest case can set them back over $700. But the more they earn or the more complicated their financial structure is, the faster the procedural costs pile up.

"It's very frustrating for these people," she said. "It's not good news when we tell them what they are faced with and have to do to comply with the American law."

Image: Mojgan Chanipour
Accountant Mojgan Chanipour gives advice to many "accidental Americans."Alexis Duclos

If they don't comply, Ghanipour says they are penalized by the French banks, which can face penalties of their own if they don't cooperate with the U.S. tax authority. As the result, some may find it difficult to open accounts, get loans or change banks.

In addition to the financial restrictions many claim to have experienced as a result of FATCA, some also talk about "moral damages" — like anxiety and distress — that their situation is causing them.

One of the most high-profile "accidental Americans" is British Foreign Secretary Boris Johnson, who has previously said that forcing someone like him to pay U.S. taxes was "absolutely outrageous." Johnson was born to British parents in New York City in 1964, and moved to Britain when he was 5. Johnson, 53, the former mayor of London, renounced his U.S. citizenship in 2016. According to local media, he had to settle a U.S. tax bill on the earlier sale of his London house in 2015.

In France, realizing the scope of the problem, Lehagre started a Facebook campaign last year to give people like him a voice.

In the first year, a hundred such Americans living in France reached out to him. To date, 450 people have signed up and more than 1,200 have made inquiries. Lehagre estimates there could be more than 10,000 "accidental Americans" in France alone, but there are no exact estimates of their numbers worldwide.

Lehagre has reached out to both French and U.S. officials asking them to do something to help these bi-nationals and started an association to bring them together.

His association is asking the United States to switch to a tax system based on residency and to allow "accidental Americans" the ability to freely renounce their U.S. citizenship, without having to comply with the IRS.

"I used to be so proud of telling everyone that I was born in the United States," Lehagre said. "Today, I am not feeling pride but rather disappointment. ... I feel like I'm being held up."

Nancy Ing reported from Paris. Yuliya Talmazan reported from London.

CORRECTION (April 23, 2018, 4:13 a.m. ET): An earlier version of this article incorrectly stated that Fabien Lehagre worked in Austria during 2014.