TIGTA report signals potential increase in IRS enforcement of foreign asset reporting

A recent TIGTA report has raised concerns that the IRS has not fully used Foreign Account Tax Compliance Act data to pursue taxpayers who may not have filed Form 8938, which is required for certain foreign financial assets.

TIGTA identified 405 apparent non-filers with aggregate foreign account balances approaching $6.2 trillion, but only 164 were referred for examination, and just 12 of those examinations had been completed by the end of the audit period.

Five of the 12 completed examinations resulted in $39.7 million in additional tax, $30,000 in Form 8938 penalties and $50,000 in other penalties.

Another 241 taxpayers received educational or soft letters rather than examinations, with 34 subsequently filing amended returns that reported approximately $1.4 million in additional tax.

TIGTA estimated that the IRS could have assessed about $3.93 million in initial Form 8938 penalties against 393 unexamined taxpayers, although the agency disagreed with TIGTA’s recommendation to impose penalties on unexamined non-filers.

The report could signal greater enforcement attention on foreign asset reporting as the IRS increasingly relies on technology and data analytics amid workforce reductions. Learn more.