The IRS’s Use of AI to Find Expat Foreign Assets (2026)
The IRS’s Use of AI to Find Expat Foreign Assets (2026)
With the introduction of AI, the IRS has increased its ability to identify U.S. taxpayers who are out of compliance with various tax and reporting requirements. For individuals with foreign accounts, assets, and investments, this gives the IRS an upper hand and allows it to uncover information about those accounts, assets, and investments that may not have been properly reported in prior years. This is because more than 110 different countries (and hundreds of thousands of foreign financial institutions) have entered into FATCA agreements with the U.S. government to supply this information. And while oftentimes the information sits dormant in the IRS computer systems, with AI at its disposal, the IRS now has a significantly increased ability to uncover the information. Let’s look at a few key facts regarding what taxpayers should be aware of —
FATCA Reporting
More than 110 foreign countries, and hundreds of thousands of foreign financial institutions report foreign account holders who were U.S. persons, to the U.S. government. Oftentimes, this information sits dormant at the IRS because the Internal Revenue Service is understaffed and under-resourced — and therefore, it is difficult for them to sift through all of the information to determine which taxpayers are non-compliant. But with the ability to introduce AI systems into the mix, the IRS can now use AI to cross-reference the information it received from the foreign financial institutions along with individual taxpayer data to determine non-compliance.
Missed FBAR or Accounts on FBAR
Another issue that many taxpayers have when it comes to international reporting is that they are not aware of the FBAR, or they are aware of it and do not report it — or they intentionally and artificially underreport. It is important to keep in mind that with the new AI systems, the IRS can use these protocols to determine if taxpayers should have been filing the FBAR, or if they followed it and it was inaccurate. Because FBAR penalties can be so severe, taxpayers should try to remain compliant, or if they are out of compliance, consider getting into compliance.
Increased Speed Puts Taxpayers at Risk
Another very important issue for taxpayers to consider is that the IRS is able to move faster now to detect taxpayers who are out of offshore compliance. When the IRS reaches out to a taxpayer first before the taxpayer has an opportunity to get into compliance through one of the amnesty programs, then the taxpayers are no longer eligible to submit to one of these offshore disclosure programs. Once the taxpayer is no longer eligible for offshore amnesty, they are at a significantly higher risk of IRS fines and penalties — so taxpayers concerned about timing will want to consider getting the compliance sooner rather than later.
Late Filing Penalties May be Reduced or Avoided
For Taxpayers who did not timely file their FBAR and/or other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist Taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.
Late-Filing Disclosure Options
If a Taxpayer is out of compliance, there are various international offshore tax amnesty programs that they can apply to safely get into compliance. Depending on the specific facts and circumstances of the Taxpayers’ noncompliance, they can determine which program will work best for them.
*Below please find separate links to each program with extensive details about the reporting requirements and examples.
Streamlined Filing Compliance Procedures (SFCP, Non-Willful)
The Streamlined Filing Compliance Procedures is one of the most common programs used by Taxpayers who are non-willful and qualify for either the Streamlined Domestic Offshore Procedures or Streamlined Foreign Offshore Procedures.
Streamlined Domestic Offshore Procedures (SDOP, Non-Willful)
Taxpayers who are considered U.S. residents and file timely tax returns each year but fail to report foreign income and/or assets may consider the Streamlined Domestic Offshore Procedures.
Streamlined Foreign Offshore Procedures (SFOP, Non-Willful)
Taxpayers who are foreign residents may consider the Streamlined Foreign Offshore Procedures which is typically the preferred program of the two streamlined procedures. That is because under this program Taxpayers can file original returns and the 5% title 26 miscellaneous offshore penalty is waived.
Delinquent FBAR Submission Procedures (DFSP, Non-Willful/Reasonable Cause)
Taxpayers who only missed the FBAR reporting and do not have any unreported income or other international information reporting forms to file may consider the Delinquent FBAR Submission Procedures — which may include a penalty waiver.
Delinquent International Information Returns Submission Procedures (DIIRSP, Reasonable Cause)
Taxpayers who have undisclosed foreign accounts and assets beyond just the FBAR — but have no unreported income — may consider the Delinquent International Information Return Submission Procedures. Before November 2020, the IRS was more inclined to issue a penalty waiver, but since then this type of delinquency procedure submission has morphed into a reasonable cause request to waive or abate penalties.
IRS Voluntary Disclosure Procedures (VDP, Willful)
For Taxpayers who are considered willful, the IRS offers a separate program referred to as the IRS Voluntary Disclosure Program (VDP). This program is used by Taxpayers to disclose both unreported domestic and offshore assets and income (before 2018, there was a separate program that only dealt with offshore assets (OVDP), but that program merged back into the traditional voluntary disclosure program (VDP).
Quiet Disclosure
Quiet disclosure is when a Taxpayer submits information to the IRS regarding the undisclosed foreign accounts, assets, and income but they do not go through one of the approved offshore disclosure programs. This is illegal and the IRS has indicated they have every intention of investigating Taxpayers who they discover intentionally sought to file delinquent forms to avoid the penalty instead of submitting to one of the approved methods identified above.
Current Year vs. Prior Year Non-Compliance
Once a Taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, Taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.
Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties.
Need Help Finding an Experienced Offshore Tax Attorney?
When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for Taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. *This resource may help Taxpayers seeking to hire offshore tax counsel: How to Hire an Offshore Disclosure Lawyer.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. Contact our firm today for assistance.