Goulder also dismisses any ideas about stashing assets in an offshore account. "Stashing your assets in an offshore account or holding company leaves you no better off than if it were invested 'onshore.' … All income is subject to U.S. tax regardless of its geographic source," he says. "It all goes on your tax return just the same. The only benefit of having an offshore account is if you don't report the income—and that's illegal, regardless of the misleading gimmicks you occasionally see on some unsavory website."
A drastic option. There is one way to avoid paying U.S. income tax: Give up U.S. citizenship and acquire citizenship of the other country. The downside to this move if that a person loses all the benefits of being an American abroad. The upside is that the IRS no longer has jurisdiction.
According to Koroghlanian, this could be an option for retirees who have settled elsewhere. "During retirement, it's going to be much the same system as long as the retiree is keeping U.S. citizenship," she says. "Some decide to give up U.S. citizenship, but as long as they keep it, they have the responsibility to file and pay U.S. income tax on their worldwide income."