IRS Deploys AI Agents: What This Means for Your Expat Tax Filing

The Internal Revenue Service is rolling out Salesforce’s AI agent program, Agentforce, across multiple divisions for the first time, marking a significant shift in how the agency handles tax compliance. For Americans living abroad, this development carries immediate implications for how your international tax filings will be reviewed and processed.

The IRS slashed its workforce by at least 25% earlier this year, with roughly 12,000 people leaving the agency. Revenue agents who examine tax returns experienced the steepest cuts at 31% of their workforce. The agency began modernizing its decades-old systems in 2023, and AI deployment represents the next phase. You should understand how this technology will affect your filing requirements and audit risk.

The good news? If you’re filing accurately with the right forms and exclusions, these changes simply mean faster processing. If you’ve been putting off filing or have inconsistencies in your returns, now is the time to address them proactively.

How Will AI Change IRS Enforcement for My Expat Taxes?

The IRS will use Agentforce across the Office of Chief Counsel, Taxpayer Advocate Services and the Office of Appeals, according to Paul Tatum, Salesforce executive vice president of global public sector solutions. The technology is designed to handle tasks like case summarization and document searches.

Tatum emphasized that the AI agents are built with “a lot of guardrails” and are not authorized to make “final decisions” or “disperse funds.” This means while AI will flag potential issues and assist with processing, human IRS agents will still make all final determinations on your tax matters.

The technology excels at data matching and pattern recognition, which means the IRS can now more efficiently cross-check information from multiple sources. For you as an expat, this includes:

FATCA Data Matching: Foreign financial institutions report your account information to the IRS under the Foreign Account Tax Compliance Act. AI can instantly compare this reported data against what you’ve disclosed on Form 8938 and your tax return.

Complex Form Analysis: AI systems are particularly effective at spotting inconsistencies on forms common to expats, such as Form 2555 (Foreign Earned Income Exclusion), Form 1116 (Foreign Tax Credit), and FinCEN Form 114 (FBAR).

Partnership and Business Structures: The technology is being specifically leveraged to analyze complex partnership structures and foreign corporation reporting, increasing audit risk for expats with foreign business interests requiring Form 5471.

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Should I Be Worried About AI-Driven Audits?

The short answer: only if your filings have issues. AI doesn’t create new tax obligations; it simply makes it easier for the IRS to identify discrepancies that already exist.

If you’ve been filing accurately and completely reporting your worldwide income, foreign accounts, and foreign assets, AI works in your favor by speeding up processing times and potentially reducing unnecessary human review delays.

However, certain situations will likely trigger increased scrutiny:

Mismatches Between Forms: If your claimed Foreign Earned Income Exclusion on Form 2555 doesn’t align with FBAR or FATCA filings that suggest higher income, AI systems can flag this instantly.
Unreported Foreign Accounts: Even minor omissions on your FBAR filing can now be detected through automated cross-checking with FATCA data from foreign financial institutions.
Inconsistent Income Reporting: AI can detect when your reported income doesn’t match third-party information reports or when your lifestyle indicators (like foreign property ownership) don’t align with your declared income.

The IRS has emphasized that AI will not process tax returns without human oversight, which means IRS agents will still review flagged returns. The AI simply makes initial screening more efficient.

Rob Fitzpatrick, senior counsel in the IRS Office of Chief Counsel, characterized the shift as inevitable and necessary to keep pace with sophisticated tax strategies. The focus is on efficiency, not creating new compliance burdens for taxpayers who file correctly.

What Forms Are Most Affected by AI Scrutiny?

AI-enhanced enforcement particularly impacts the most common expat forms:

FBAR (FinCEN Form 114): Required if your foreign financial accounts exceeded $10,000 in aggregate at any point during the year. The IRS receives account balance data directly from foreign financial institutions and can now match this against your FBAR filings with precision.

Form 8938 (FATCA): Required for specified foreign financial assets above certain thresholds ($200,000 for single expats abroad, $400,000 for married filing jointly). AI can cross-reference this with FBAR filings and third-party reports to identify unreported assets.

Form 2555 (FEIE): Used to exclude up to $130,000 of foreign earned income for the tax year. AI can verify your physical presence claims against entry/exit records and identify inconsistencies in your qualifying period calculations.

Form 1116 (FTC): Used to claim Foreign Tax Credit for taxes paid to foreign governments. The system can now more easily detect when credits claimed don’t match foreign tax authority data or treaty provisions.

How Can I Protect Myself From AI-Triggered Audits?

The best protection is accurate, complete filing. Here’s your action plan:

Report All Foreign Accounts: Even accounts you think are insignificant must be reported if they meet the thresholds. A $12,000 checking account in your home country absolutely requires FBAR reporting.
Be Consistent Across Forms: Ensure your income reported on Form 1040 matches what you’re claiming on Form 2555 and Form 1116. Inconsistencies are precisely what AI is designed to detect.
Document Everything: Keep detailed records of your days abroad for the Physical Presence Test, housing expenses for the Foreign Housing Exclusion, and foreign taxes paid for the Foreign Tax Credit. If AI flags your return, documentation is your strongest defense.
File Forms You Need, Not Just Forms You Want: Don’t skip required forms like FBAR or Form 8938 just because they don’t generate tax owed. These informational returns are precisely what AI systems cross-check against other data.
Address Past Issues Now: If you have unfiled returns or unreported foreign accounts, use the Streamlined Filing Compliance Procedures to catch up before AI systems identify the gaps.

What If I’ve Been Filing Incorrectly or Haven’t Filed at All?

This is the most important time to address these issues proactively. With AI enhancing the IRS’s detection capabilities, the likelihood of being identified for non-compliance has increased significantly.

The good news: the IRS offers several programs specifically designed for expats who need to catch up:

Streamlined Filing Compliance Procedures: If you’ve been non-willfully non-compliant (you didn’t know you needed to file), you can catch up on the last three years of tax returns and six years of FBARs with minimal or no penalties.

Delinquent FBAR Submission Procedures: If you’ve filed tax returns but missed FBAR filings, you can catch up on those separately without penalties if your failure was non-willful.

The key is acting before the IRS contacts you. Coming forward voluntarily significantly reduces penalties and demonstrates good faith compliance.

Will I Owe More in Taxes Because of AI?

No. AI doesn’t change the tax code or your eligibility for protections. What it changes is the IRS’s ability to verify that you’re using those protections correctly.

Most American expats still owe little to no U.S. tax thanks to:

Foreign Earned Income Exclusion: Exclude up to $130,000 of foreign earned income using Form 2555.
Foreign Tax Credit: Claim dollar-for-dollar credits for foreign income taxes paid using Form 1116. For expats in high-tax countries like the UK, Germany, or France, this often eliminates U.S. tax liability completely.
Foreign Housing Exclusion: Exclude additional amounts for qualifying housing expenses above the base amount of $20,800.

IRS data shows that two out of three American expats owe $0 in U.S. taxes after properly applying available exclusions and credits. AI deployment doesn’t change this. It simply means the IRS can more efficiently verify that you’re using these protections correctly and not improperly excluding income or omitting required filings.

What Should I Do Right Now?

Whether you’re current on your filings or catching up, here’s your action plan:

Review Your Recent Returns: Ensure you’ve filed all required forms (FBAR, Form 8938, Form 5471 if applicable) and that your reported income is consistent across all forms.
Verify Foreign Account Reporting: If you had more than $10,000 in foreign financial accounts at any point last year, confirm you filed your FBAR by the deadline.
Check FATCA Thresholds: Review whether your foreign assets exceeded the FATCA reporting thresholds requiring Form 8938.
Gather Documentation: Organize records of foreign taxes paid, days spent abroad, housing expenses, and foreign account statements. If AI flags your return, having documentation ready will expedite resolution.
Address Gaps Proactively: If you’ve missed filings or have unreported accounts, use available compliance programs before AI systems identify the issues.

The Bottom Line

The IRS’s deployment of AI represents a more efficient enforcement strategy, but it doesn’t create new obligations for expats who are filing correctly. If you’re accurately reporting worldwide income, properly claiming available exclusions and credits, and filing all required informational returns, AI-enhanced review simply means faster processing.

The real risk is for expats who have been non-compliant or filing incompletely. With AI’s enhanced data-matching capabilities, the window for undetected non-compliance is closing rapidly.

We’ve helped over 23,000 expats file over 71,000 returns, and many came to us after discovering gaps in their previous filings. Through proper catch-up programs and accurate filing, the vast majority avoided penalties entirely and achieved the peace of mind that comes from knowing their taxes were done right.

No matter how late, messy, or complex your expat tax situation may be, we can help. Greenback is an American company founded in 2009 by U.S. expats for expats. Many of our CPAs and Enrolled Agents are expats themselves, living in 14 time zones, so they experience firsthand the challenges of living abroad.

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This article is for informational purposes only and does not constitute tax or legal advice. Individual tax situations vary, and you should consult with a qualified tax professional regarding your specific circumstances.