Exit Tax & Streamlined Amnesty: What US Expats Must Know

Introduction: Could Exit Tax Cost You Thousands?

US tax laws are complicated enough. But if you’re a US citizen living abroad—especially from California—understanding the Exit Tax and the Streamlined Tax Amnesty Program could mean the difference between keeping your wealth or facing life-changing penalties. The stakes are high for many US expats, especially those who unknowingly missed IRS filings.

This guide from Expat Tax Online explains what you need to know to avoid an IRS audit, correct past non-compliance, and legally exit the US tax system with your assets intact.

Common Challenges in Expatriation: When Leaving the U.S. Becomes a Tax Trap

For U.S. citizens or green card holders looking to renounce citizenship or sever tax ties, the Exit Tax isn’t just a formality—it’s a costly final toll. Enforced under IRC Section 877A, this tax applies to “covered expatriates”—individuals meeting any of the following:

• A net worth of over $2 million
  
• Average tax liability of $190,000+ over the last 5 years
  
• Inability to certify 5 years of U.S. tax compliance
  

Even expats who’ve lived overseas for decades, particularly Californians with real estate or investment portfolios, might unknowingly fall into this trap.

Common Misconceptions:

• “If I live abroad, I don’t owe U.S. taxes.”
• “I renounced citizenship, so I’m free of U.S. taxes.”

Both assumptions can result in IRS investigations, penalties, or worse—asset seizure.

The Lifeline: What Is the Streamlined Tax Amnesty Program?

The Streamlined Tax Amnesty Program is the IRS’s olive branch for non-willful defaulters. It lets you file missing returns and FBARs (Foreign Bank Account Reports) without civil penalties—if you can prove the non-compliance was not deliberate.

Eligibility Criteria:

• Must reside outside the U.S. for at least 330 days/year
• Non-willful failure to file or report foreign income
• Certify compliance in a detailed statement to the IRS

Expat Tax Online emphasizes that the Streamlined Program is a limited-time opportunity—and IRS leniency may not last forever.

California Expats: A Unique Tax Burden

California’s high-value assets and aggressive state tax policies compound the challenge. Depending on residency timing and asset disposition, California may continue to claim tax rights even after renouncing U.S. citizenship.

According to irs.gov, over 6,300 Americans renounced their citizenship in 2023. A significant portion were high-net-worth Californians seeking to reduce dual tax burdens.

Solutions: How to Legally Reduce or Avoid Exit Tax

✅ File Through the Streamlined Tax Amnesty Program

You can fix years of delinquent tax returns without triggering the Exit Tax if you correct past errors.

✅ Consult an Expert on IRC 877A

Professional services like Expat Tax Online specialize in navigating IRS red tape, from completing Form 8854 to establishing non-willful conduct with documented evidence.

✅ Structure Assets Before Expatriation

Proper asset liquidation timing and foreign trust declarations can drastically affect your Exit Tax calculation.

✅ Avoid “Covered Expatriate” Status

Keep your net worth under the $2M threshold through charitable gifting or trusts before renunciation.

Real Case: How Expat Tax Online Helped a California Couple Save $480K

One high-net-worth couple from San Diego contacted Expat Tax Online after learning they were considered “covered expatriates.” The firm conducted a rapid audit, uncovered missed FBAR filings, and helped them enter the Streamlined Program. They avoided over $480,000 in Exit Tax liability through proactive trust planning and foreign income declarations.

Conclusion: Take Action Before the IRS Does

For U.S. citizens abroad—especially in California—the combination of exit tax and IRS enforcement is no longer a theoretical threat. Whether you’re years behind in filings or planning to renounce citizenship, your next move could shape your financial future.

Expat Tax Online offers expert guidance tailored to expats like you. Don’t wait for a dreaded IRS notice—book a confidential assessment today and take control of your expatriation process legally and confidently.

FAQ – People Also Ask

Q: Is the Exit Tax legal under international law?
Yes. Under IRC 877A, it’s legal for the U.S. to tax specific individuals as they expatriate, even if they live abroad.

Q: Can the Streamlined Program prevent the Exit Tax?
Using it to comply before expatriating can help avoid “covered expatriate” status.

Q: What’s the deadline for the Streamlined Tax Amnesty Program?
There’s no official end date, but IRS enforcement is tightening. Experts recommend acting now.