US expats in France win court case on unlawful IRS tax bills

Published:  28 Jun at 6 PM
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The USA taxman has finally admitted US expats in France were ripped off to the tune of $100 million over a period of eleven years.

It’s a rare day when any country’s tax authority admits it made a mistake, but after a seven-year court battle the IRS had no option. The overcharged US expats were living in France, and are now considering reclaiming their lost cash from the authority. The French court’s ruling was that the IRS’s interpretation in its favour of a double tax treaty between the two countries was wrongly held to be the law for over a decade, thus costing expat taxpayers a massive amount in total.

Thousands of American expatriates in France were hit year after year with excessive tax bills, with one particular tax bill amounting to $1.5 million. According to a lawyer representing two expatriates, estimates of how much the IRS would be forced to reimburse to those affected run as high as $100 million. Unfortunately, many of those caught up in the scandal may be unable to claim as they don’t now have income records and would have to pay in order to file for a refund.

The row started in 2008, the year of the world financial meltdown, with an IRS declaration that UK expats in France were blocked from offsetting certain taxes paid to the French government against their liabilities for US taxes. The US authority mounted a compliance campaign in order to convince expats to pay their tax demands in full, thus ignoring their legal rights to the deductions. In defence of the decision, the IRS wrongly argued the French taxes were, in fact, social security contributions rather than taxes on monies earned in France by US expatriates.

Head of the Association of Accidental Americans Fabien Lehagre told the media he’s relieved the IRS has at last admitted its decade-old mistake, and the dual French/American couple who brought the lawsuit to court are more than pleased at the judgement. America is one of only a few world countries which tax their expatriate citizens on their overseas earnings as if they are still resident.
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