The indictment was unsealed on February 24, 2026 and details how Schmidt allegedly claimed a meager $5,000 annual income on tax returns while raking in over $6 million from his hedge fund operations between 2020 and 2023. He faces allegations of underreporting millions in income, evading taxes on a lucrative Colorado real estate flip, and failing to disclose foreign bank accounts holding substantial assets. The U.S. Department of Justice press release details the indictment and charges.
This case underscores the IRS’ aggressive pursuit of high-net-worth individuals involved in crypto and offshore dealings, even after they’ve severed ties with U.S. citizenship. Expatriation might seem like a clean break from Uncle Sam’s tax grasp, but as Schmidt’s situation illustrates, it’s anything but simple.
Under IRC Section 877A, “covered expatriates”, those with a net worth exceeding $2 million or significant average annual income tax liability, face an exit tax on unrealized gains, treating the renunciation as a deemed sale of worldwide assets. Prosecutors claim Schmidt misrepresented his net worth as just $25,000. Of course, his pre-expatriation income remains fully taxable, and failures like not filing FBARs (Reports of Foreign Bank and Financial Accounts) can lead to severe fines and imprisonment.
IRS investigations into expatriates are increasing as the numbers of expatriations rise. IRS investigations often stem from discrepancies in Form 8854 filings or unreported offshore activities. This high-profile prosecution signals that the agency is ramping up scrutiny, especially in the crypto space where tracing assets can be challenging but not impossible. With Frank Bisignano now at the IRS helm as its CEO, offshore enforcement may become more aggressive.
Mr. Schmidt’s alleged actions, such as moving funds offshore to evade detection and submitting false documents for a $3.2 million unreported property gain, are particularly egregious. For anyone considering expatriation, remember this is a hot audit area for the IRS. Combined with offshore crypto assets, the audit lottery stakes become even higher and remember the U.S. has agreed to implement automatic reporting under the OECD’s Crypto-Asset Reporting Framework, “CARF”. CARF is the digital-asset counterpart to the Common Reporting Standard “CRS” that has exchanged bank and securities account data among signatory countries.
Even unintentional errors, like overlooking FBAR requirements or miscalculating net worth, can invite trouble. Renouncing U.S. citizenship is an irrevocable step with lifelong implications. Cutting corners is not an option and could cost you far more than you save. Those considering this step should consult early with qualified tax advisors and attorneys specializing in expatriation matters. There are many advisors out there claiming to know this complex area of tax law, but be very careful with choosing the person to assist. Mistakes here can lead to life-altering consequences.
I remember handling my first expatriation case in 1993 as a young attorney working in Hong Kong. The laws were so different then, with far fewer tax triggers and much simpler compliance requirements. Expatriation numbers have been on a steep trajectory since! What was once a rare occurrence—often just a few hundred per year—has surged in recent decades, with annual figures frequently reaching 4,000 driven by FATCA enforcement, worldwide taxation frustrations, and evolving global mobility.
Want to learn more about expatriation – here’s a great place to start.
Posted February 26, 2026
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