How US Expats Avoid the California Exit Tax

If you’re an American abroad or behind on your taxes, catching up with US taxes can be overwhelming. The US has a citizenship-based taxation system, so all US citizens must report their worldwide income, even if they live outside the country. However, there are streamlined programs and expert services that can make the process easier and less painful.

Why Catching Up with US Taxes is Important

Not filing taxes can result in big penalties, interest charges, and legal consequences. The IRS has various amnesty programs that allow taxpayers to become compliant without a severe financial hit. Being current also means you’ll be in good standing for future tax benefits, social security, visa, or residency applications.

Get Caught Up on US Taxes

1. Use the Streamlined Filing Compliance Procedures

The best way to get back on track with tax filings is through the Streamlined Filing Compliance Procedures. This is for taxpayers who didn’t file their US taxes due to non-willful reasons.

• Filing the last three years of back tax returns.
• If applicable, file the six years of Foreign Bank Account Reports (FBARs).
• Make and sign a statement saying the failure to file was non-willful.
• Pay any taxes you owe, but penalties for late filing and FBARs are waived under this program.

2. File Past Due Tax Returns with the IRS

If you don’t qualify for the Streamlined Program but need to catch up, filing past due tax returns voluntarily before the IRS contacts you is the way to go. To do this:

• Gather all necessary documents, like W-2s, 1099s, or foreign income statements.
• Complete and submit missing returns for the relevant tax years.
• Consider using a service like Expat US Tax to do it right and avoid common mistakes.

3. Do You Qualify for the Foreign Earned Income Exclusion (FEIE)

For American expats, the Foreign Earned Income Exclusion (FEIE) lets you exclude up to $120,000 (as of 2025, subject to change) of foreign-earned income from U.S. taxes, potentially eliminating your tax liability. You qualify if you meet either of the following criteria:

• The Physical Presence Test requires spending at least 330 full days outside the U.S. within 12 months. within 12 months), or
• The Bona Fide Residence Test requires establishing a permanent, long-term residence in a foreign country.

4. Apply for the IRS Voluntary Disclosure Program (VDP if Necessary)

If you have criminal exposure due to willful tax evasion, the Voluntary Disclosure Program (VDP) allows you to fix your filings and reduce prosecution risk. Unlike the Streamlined Program, VDP usually involves penalties, but it’s a way to avoid more severe consequences.

5. Work with a Professional Tax Consultant

US tax laws are complicated, especially for expats. Expat US Tax, a trusted tax consultancy, helps American citizens abroad meet their tax obligations efficiently. They assist with:

• Back tax returns.
• IRS compliance programs.
• Claiming tax benefits like FEIE and Foreign Tax Credit.
• FBARs and other international tax forms.

People Also Ask (PAA)

1. How many years back did I need to file if I hadn’t paid U.S. taxes?

• The Streamlined Filing Compliance Procedures require three years of tax returns and six years of FBARs. If you don’t qualify for this program, the IRS may request additional years based on your case.

2. Am I subject to penalties for filing my tax returns late?

• If you qualify for the Streamlined Program, penalties are waived. Otherwise, penalties may apply, but catching up before an IRS audit can help reduce them.

3. What if I don’t owe any taxes? Do I still need to file?

• Yes. U.S. citizens must file a tax return and FBAR if they meet income and account thresholds, even if they don’t owe any tax.

4. Can the IRS find out if I haven’t filed?

• Yes. The US has agreements with many foreign financial institutions through FATCA (Foreign Account Tax Compliance Act), which allows them to report American account holders to the IRS.

5. How can Expat US Tax help me catch up?

• Expat US Tax provides customized solutions for back tax filings, ensuring compliance with IRS rules while optimizing tax savings.