Many people think moving abroad will make U.S. taxes less of a concern. But for expats, that’s rarely the case. The U.S. tax system continues to apply even when life is happening in another country.

The challenge is not just the filing; it’s how different the rules feel. What counts as income, what needs to be reported, and when forms are due can all create confusion. These U.S. expat tax issues often grow quietly, especially when foreign accounts or assets are involved.

What starts as a small oversight can lead to penalties, stress, or legal trouble. And once the IRS gets involved, the process becomes harder to manage.

If you live outside the United States and still have a legal or financial tie to it, the IRS may treat you as a U.S. expat. This applies even if you’ve lived abroad for years or pay taxes in another country.

You may fall under this category if:

• You have moved abroad and established a home outside the U.S.
• You still hold a green card while living in another country.
• You have dual citizenship and earn or manage income overseas.

If any of these apply to you, you’re expected to meet key U.S. expat tax requirements, including:

• Filing a U.S. tax return every year.
• Reporting foreign bank accounts if their total value crosses $10,000 (FBAR).
• Declaring overseas assets, businesses, or trusts if required.

The U.S. tax system is based on citizenship, not location. That means your U.S. expat tax obligations remain active no matter where you live or work.

U.S. expats often run into tax problems, not because they avoid filing, but because the rules are complex and easy to miss. Many of these mistakes come from assumptions that don’t match what the IRS expects.

Here are some of the most common U.S. expat tax issues:

• Not filing a return because they already pay foreign taxes.
• Leaving out foreign income like rent, pensions, or freelance work.
• Overlooking deadlines, especially when time zones or filing dates differ.
• Ignoring tax relief options like the Foreign Earned Income Exclusion or Tax Credit.
• Failing to understand or meet foreign reporting requirements for overseas accounts and assets.

The IRS has made enforcement abroad a growing priority. It now works closely with banks and tax agencies in other countries to identify unreported income and financial accounts. Even small mistakes can grow quickly if left unaddressed.

Expats who stay informed and take action early, especially when it comes to foreign asset reporting, can avoid many of these problems before they begin.

The Fifth Amendment gives people the right to avoid self-incrimination. In other words, you don’t have to answer questions or hand over information if doing so could get you into criminal trouble. But in tax matters, especially with foreign accounts, this right doesn’t always apply the way expats hope it will.

When the IRS asks for information about offshore bank accounts, many taxpayers try to use the Fifth Amendment as a defense. But courts have set clear boundaries. In many cases, you still have to provide documents, even if those documents reveal something wrong.

Here’s how the Fifth works and why it doesn’t protect everything.

Fifth Amendment: What Does It Cover?

The Fifth Amendment tax defense is about protecting yourself from giving the government evidence that could lead to criminal charges. It often comes up in IRS investigations, especially when there’s a risk of willful tax violations.

The amendment covers:

• Verbal testimony that could admit wrongdoing
• Written responses that reveal criminal conduct
• Refusal to answer IRS questions in a formal interview

However, this protection doesn’t apply across the board. In civil tax matters, the IRS can still request documents even during a criminal investigation.

The Fifth Amendment shields you from testifying against yourself, not necessarily from producing every document. That line gets clearer when we look at the required records.

This is where the Required Records Doctrine changes the outcome for many expats.

The Required Records Doctrine

The Required Records Doctrine is a rule that makes some records an exception to the Fifth Amendment. If the law says you must keep and produce a certain type of document, then you can’t use the Fifth to withhold it.

This applies directly to Report of Foreign Bank and Financial Accounts (FBAR) filings.

Let’s say you have more than $10,000 in foreign accounts. The law requires you to file FinCEN Form 114 (FBAR) and report those accounts. Courts have ruled that FBAR is a required record. That means the government can ask for it, and the Fifth Amendment won’t stop them.

A Real Case: United States v. Chabot

In April 2010, the IRS received information from the French tax authority under the U.S.–France tax treaty. The data revealed that Eli Chabot was the beneficial owner of a company called Pelsa Business Inc., which held accounts at HSBC between 2005 and 2007.

Based on this, the IRS issued a summons asking Eli and Renee Chabot to appear and provide documents related to those foreign accounts.

How the Taxpayers Responded →

The Chabots appeared in May 2012 but refused to answer questions or produce any records. On advice from their attorney, they invoked their Fifth Amendment right against self-incrimination. They continued to maintain this position even after multiple follow-up summonses from the IRS.

How the Court Ruled →

The court sided with the IRS. It held that the records requested were required to be kept under the Bank Secrecy Act and related regulations, specifically 31 C.F.R. § 1010.420. Because of that, the Fifth Amendment did not apply.

The ruling followed the reasoning of several federal courts that had already confirmed that required records, such as FBAR-related documents, are not protected under the Fifth Amendment.

Why the Case Still Matters →

United States v. Chabot became a key legal precedent in FBAR enforcement. Courts across the country have since relied on the same legal reasoning known as the Required Records Doctrine to compel taxpayers to provide offshore account information.

If someone tries to avoid disclosing foreign accounts by claiming Fifth Amendment protection, the IRS will likely point to this case. And the court will likely agree with them.

Handling foreign bank accounts is one of the most critical obligations for U.S. expats. The FBAR (Foreign Bank Account Report) rules require you to disclose certain foreign accounts to U.S. authorities. Missed reports or errors can lead to serious penalties.

This section makes FBAR compliance for expats clearer: when you must file, what accounts count, and what mistakes to avoid.

FBAR Filing Requirements Explained

You file the FBAR using FinCEN Form 114, not via your regular U.S. tax return. Here’s what the rules say:

• You must file an FBAR if you are a U.S. person (citizen, resident, trust, estate, etc.) and you have a financial interest in or signature authority over foreign accounts. 
• If the aggregate value of your foreign accounts exceeds $10,000 at any point during the year, you must report them.
• “Aggregate value” means the sum across all foreign accounts, not each account alone.
• Reportable accounts include bank accounts, brokerage accounts, mutual funds, foreign pensions (in some cases), and accounts in which you have signature authority or control.
• The deadline for FBAR is April 15, but you automatically get an extension to October 15. 
• You must file electronically using the BSA E‑Filing system. 
• FBAR is a reporting requirement, not a tax form. The fact that you file it does not mean you pay tax just for having accounts abroad.

Common FBAR Mistakes & Penalties

Even those trying to comply make mistakes. Some errors are harmless, others can trigger severe penalties. Understanding the distinctions is vital.

Common Mistakes by Expats

• Not filing because you believe paying foreign tax is enough.
• Assuming only accounts over $10,000 individually must be reported.
• Leaving out accounts you don’t directly own, but where you have control or signature authority.
• Missing the extension deadline or misunderstanding the extension rules.
• Failing to claim reasonable cause when an error occurs.
• Maintaining poor documentation, so when asked, you can’t prove your good-faith effort.

Penalties for Non‑Compliance

Penalties vary depending on whether the violation is non‑willful or willful.

1. Non‑Willful Violations

• The IRS can impose a civil penalty of up to $10,000 per violation under 31 U.S.C. § 5321(a)(5)(B)(i) (subject to annual inflation adjustments).
• The IRS may waive the penalty entirely if you can show reasonable cause and that you attempted to correct the error. 
• The total non-willful penalties across years generally cannot exceed 50% of the highest aggregate account balance during the years under review. 

2. Willful Violations

• Penalties are far more severe: the greater of 50% of the unreported account balance or a fixed dollar amount (currently $165,353, adjusted for inflation) per violation. 
• The IRS may also pursue criminal charges, including fines of up to $250,000 and up to 5 years in prison. 

3. Other Things to Note

• Interest on penalties only begins once the IRS formally assesses them. 
• The statute of limitations for FBAR assessments is six years.

The IRS has widened its reach when it comes to foreign accounts and income. Through new systems and global agreements, it now receives data from foreign banks, tax agencies, and even fintech platforms. What was once difficult to track is now part of a growing network of international cooperation.

For U.S. expats, this means one thing: reporting mistakes is more likely to be noticed. And when that happens, the consequences can be serious. The best way forward is to understand how the IRS finds offshore accounts and how you can fix U.S. expat tax issues before they turn into penalties.

How the IRS Tracks Offshore Accounts?

Today, the IRS has access to more global financial data than ever before. And most of it comes from outside the United States. That’s why many expats are surprised when the IRS already knows about their foreign accounts.

Here’s how the system works:

• FATCA Reports from Foreign Banks: Under the Bank Secrecy Act and Foreign Account Tax Compliance Act (FATCA), banks around the world must report U.S. account holders to the IRS. FATCA reporting includes details about balances, account numbers, and ownership. Even small accounts are often flagged. This global system feeds directly into IRS enforcement of expat tax obligations.
• Tax Treaties and Data Sharing Agreements: The U.S. has signed dozens of international tax treaties that allow tax agencies to share information. That includes account records, residency details, and tax filings. If you hold assets in a treaty country, your account may already be visible to the IRS.
• John Doe Summonses and Court Orders: When the IRS doesn’t know names but suspects wrongdoing, it can issue a John Doe summons. This forces a bank or institution to turn over records tied to U.S. persons without needing a specific target in advance. These tools were used in the landmark Swiss Bank crackdown and are still active today.
• Correspondent Accounts and Transaction Trails: Even when your account is in a foreign bank, your money may still move through U.S. banks. These trails help the IRS follow transfers and link them back to U.S. taxpayers.
• Fintech and Crypto Platforms: The IRS is also collecting information from international crypto exchanges and mobile payment platforms. These are no longer safe zones for hidden income.

Each of these tools supports IRS enforcement abroad, especially under the Bank Secrecy Act for expats. Together, they give the agency a wide lens across borders. That’s why even unintentional gaps in reporting are now riskier than ever.

Risk Mitigation Strategies

If you’ve missed a filing or failed to report offshore assets, you still have options. But the window to act shrinks once the IRS reaches you first. The following strategies are current as of 2025 and may help avoid IRS penalties while correcting past mistakes.

1. Streamlined Filing Compliance Procedures

If you’ve missed both tax returns and FBARs, and your mistakes were non-willful, this is likely the best path. The Streamlined Filing Compliance Procedures allow expats to catch up on multiple years of returns and FBARs without facing harsh penalties. There are two tracks, one for U.S. residents and one for expats abroad.

2. Delinquent FBAR Submission Procedures

This option is for people who are fully up to date with tax returns but missed one or more FBAR filings. If you haven’t been contacted by the IRS and your mistake was non-willful, you may be able to submit your missing FBARs without penalties as long as your facts are strong.

3. Delinquent International Information Return Procedures

These apply to late Forms 8938, 5471, 3520, and other required international disclosures. If you act before an audit begins and explain the delay with reasonable cause, the IRS may accept your filings and waive penalties.

4. Voluntary Disclosure Practice (VDP)

IRS voluntary disclosure programs are for serious cases where willful noncompliance or criminal exposure may exist. The offshore voluntary disclosure process starts with Form 14457 and a preclearance request. If accepted, you can avoid prosecution but must pay taxes, interest, and a structured penalty. This path is best handled with legal representation.

Note on the Offshore Voluntary Disclosure Program (OVDP) →

The IRS closed the Offshore Voluntary Disclosure Program (OVDP) in 2018. The current VDP is more limited but still offers protection when used properly.

The IRS has widened its reach when it comes to foreign accounts and income. Through new systems and global agreements, it now receives data from foreign banks, tax agencies, and even fintech platforms. What was once difficult to track is now part of a growing network of international cooperation.

For U.S. expats, this means one thing: reporting mistakes is more likely to be noticed. And when that happens, the consequences can be serious. The best way forward is to understand how the IRS finds offshore accounts and how you can fix U.S. expat tax issues before they turn into penalties.

How the IRS Tracks Offshore Accounts?

Today, the IRS has access to more global financial data than ever before. And most of it comes from outside the United States. That’s why many expats are surprised when the IRS already knows about their foreign accounts.

Here’s how the system works:

• FATCA Reports from Foreign Banks: Under the Bank Secrecy Act and Foreign Account Tax Compliance Act (FATCA), banks around the world must report U.S. account holders to the IRS. FATCA reporting includes details about balances, account numbers, and ownership. Even small accounts are often flagged. This global system feeds directly into IRS enforcement of expat tax obligations.
• Tax Treaties and Data Sharing Agreements: The U.S. has signed dozens of international tax treaties that allow tax agencies to share information. That includes account records, residency details, and tax filings. If you hold assets in a treaty country, your account may already be visible to the IRS.
• John Doe Summonses and Court Orders: When the IRS doesn’t know names but suspects wrongdoing, it can issue a John Doe summons. This forces a bank or institution to turn over records tied to U.S. persons without needing a specific target in advance. These tools were used in the landmark Swiss Bank crackdown and are still active today.
• Correspondent Accounts and Transaction Trails: Even when your account is in a foreign bank, your money may still move through U.S. banks. These trails help the IRS follow transfers and link them back to U.S. taxpayers.
• Fintech and Crypto Platforms: The IRS is also collecting information from international crypto exchanges and mobile payment platforms. These are no longer safe zones for hidden income.

Each of these tools supports IRS enforcement abroad, especially under the Bank Secrecy Act for expats. Together, they give the agency a wide lens across borders. That’s why even unintentional gaps in reporting are now riskier than ever.

Risk Mitigation Strategies

If you’ve missed a filing or failed to report offshore assets, you still have options. But the window to act shrinks once the IRS reaches you first. The following strategies are current as of 2025 and may help avoid IRS penalties while correcting past mistakes.

1. Streamlined Filing Compliance Procedures

If you’ve missed both tax returns and FBARs, and your mistakes were non-willful, this is likely the best path. The Streamlined Filing Compliance Procedures allow expats to catch up on multiple years of returns and FBARs without facing harsh penalties. There are two tracks, one for U.S. residents and one for expats abroad.

2. Delinquent FBAR Submission Procedures

This option is for people who are fully up to date with tax returns but missed one or more FBAR filings. If you haven’t been contacted by the IRS and your mistake was non-willful, you may be able to submit your missing FBARs without penalties as long as your facts are strong.

3. Delinquent International Information Return Procedures

These apply to late Forms 8938, 5471, 3520, and other required international disclosures. If you act before an audit begins and explain the delay with reasonable cause, the IRS may accept your filings and waive penalties.

4. Voluntary Disclosure Practice (VDP)

IRS voluntary disclosure programs are for serious cases where willful noncompliance or criminal exposure may exist. The offshore voluntary disclosure process starts with Form 14457 and a preclearance request. If accepted, you can avoid prosecution but must pay taxes, interest, and a structured penalty. This path is best handled with legal representation.

Note on the Offshore Voluntary Disclosure Program (OVDP) →

The IRS closed the Offshore Voluntary Disclosure Program (OVDP) in 2018. The current VDP is more limited but still offers protection when used properly.

The Bank Secrecy Act (BSA) requires all U.S. persons, including expats, to report their foreign financial accounts. This applies if the combined balance of all foreign accounts goes over $10,000 at any point in the year.

The most common way to meet this requirement is by filing FinCEN Form 114, also known as the FBAR. You must file even if:

• You only have signature authority.
• The account is under your business or joint name.
• The account earned no interest.

The BSA doesn’t work alone. It supports the IRS by allowing it to access banking data from around the world. These reporting rules aren’t optional; they are backed by law, and the penalties for missing or incorrect filings can be serious.

For U.S. expats, this law forms the foundation of most offshore reporting obligations. Knowing what the BSA requires and staying ahead of deadlines is a key step toward full compliance.

Recent Regulatory Updates (2025)

In 2025, enforcement under the BSA has become stronger and more coordinated. U.S. agencies are using more tools and moving faster when reviewing expat accounts.

Here are some important updates:

• More global data-sharing: New agreements allow the IRS to access foreign bank records in real time.
• Crypto reporting: Offshore crypto accounts are being reviewed more closely.
• FATCA-FBAR mismatches: If you report under FATCA but skip FBAR, it may trigger a review.
• Joint investigations: FinCEN and the IRS now coordinate audits more quickly, especially in complex cases.

These updates mean more expats are being reviewed, not fewer. And even small mistakes can bring penalties if they’re seen as careless or willful.

But there’s good news too: the process is still manageable if you take early action. Knowing the rules, keeping good records, and seeking help when needed can protect you from serious consequences.

When it comes to IRS enforcement, the Fifth Amendment isn’t the only safeguard available to U.S. expats. There are other important protections built into both the U.S. Constitution and the Taxpayer Bill of Rights, and understanding them can help you respond with confidence if the IRS gets involved.

Here are some key protections you should know:

• Fourth Amendment: This protects you from unreasonable searches and seizures. The IRS cannot access your private financial data without proper legal authority, such as a summons or warrant.
  Sixth Amendment (in criminal cases): If your case turns into a criminal matter, you have the right to a fair trial and legal counsel.
• Due process rights: You are entitled to clear notice, a chance to respond, and access to appeal channels even when living abroad.

Alongside these, the IRS’s Taxpayer Bill of Rights gives every U.S. taxpayer, including expats, the right to:

• Be informed
• Quality service
• Challenge the IRS’s position and be heard
• Appeal a decision in an independent forum
• Pay no more than the correct amount of tax
• Privacy and confidentiality
• A fair and just tax system

In 2025, more enforcement efforts are moving fast, but your rights haven’t changed. In fact, enforcement letters now often include updated information about your appeal rights and IRS contact options.

For U.S. expats, protecting these rights starts with knowing what applies to your case and responding with care. If you’re unsure how to handle a situation or feel your rights may be at risk, speak with a qualified attorney who understands both U.S. tax law and cross-border enforcement.

Many expats don’t realize they’ve triggered IRS reporting until it’s too late.

For some, it starts with an overlooked foreign bank account. For others, it’s a late filing or a form that was never submitted. These small missteps can turn into serious U.S. expat tax issues, especially when they involve offshore reporting rules that the IRS takes seriously.

At that point, trying to fix things alone isn’t just stressful; it can make the situation harder. IRS rules for foreign accounts aren’t just about forms and deadlines. They’re detailed, constantly changing, and often unforgiving if not handled the right way from the start.

That’s exactly why experienced help matters.

Verni Tax Law is headed by Anthony N. Verni, a Tax Attorney and Certified Public Accountant (CPA) with more than 25 years of experience. He has a strong understanding of both the legal and financial aspects of tax cases, allowing him to present your situation clearly while ensuring compliance and protection.

If you need trusted expat IRS representation, don’t wait for things to escalate.

Contact Verni Tax Law today for focused, confidential guidance backed by real legal and tax experience.