Federal Audit: IRS Examined Fewer Than 3% of High-Balance FATCA Nonfilers

A federal watchdog says the IRS identified 405 U.S. taxpayers with nearly $6.2 trillion in unreported foreign account balances and examined fewer than 3% of them. The Treasury Inspector General for Tax Administration (TIGTA) released the findings on April 8, 2026, in Report No. 2026-308-009, concluding the agency has not pursued the highest-balance Form 8938 nonfilers despite spending $683 million on FATCA enforcement since 2010. Your filing obligation has not changed.

What Happened?

TIGTA audited Campaign 896, the IRS Large Business and International Division’s Offshore Private Banking Campaign. The campaign was designed to find U.S. taxpayers who failed to file Form 8938 to report high-balance foreign accounts.

The audit traced the campaign from its starting list of 1,609 flagged taxpayers down to 405 confirmed noncompliers. Of those, the IRS classified 164 as “egregious” nonfilers, with average unreported balances of approximately $1.7 billion per taxpayer. Twelve were examined. The other 152 were not.

The remaining 241 confirmed noncompliers, with average unreported balances of $377 million, received educational and soft letters. None were assessed the $10,000 starting penalty for failure to file Form 8938 under Internal Revenue Code Section 6038D(d). TIGTA estimated the IRS missed roughly $4 million in penalties it was authorized to collect.

TIGTA pointed to two underlying causes. First, IRS officials told auditors that penalty assessments are not a Campaign 896 objective, even when noncompliance is confirmed. Second, the Large Business and International Division lost 742 revenue agents in fiscal year 2025 due to budget reductions, which TIGTA expects will further constrain enforcement.

In total, the IRS has spent nearly $683 million on FATCA since 2010 and assessed approximately $14 million in FATCA nonfiling penalties over the same period.

Who Does This Affect?

The audit findings are most relevant to U.S. taxpayers who hold foreign financial assets above the Form 8938 reporting threshold. That includes:

Anyone with unreported foreign accounts from prior years who has been weighing whether to come forward
Expats holding foreign brokerage, mutual fund, or pension balances who want a clear read on their reporting position
Retirees abroad with foreign pension accounts, annuities, or investment portfolios
Digital nomads and remote workers with offshore brokerage accounts or non-U.S. crypto platforms
Americans working abroad with deferred compensation, foreign retirement plans, or signature authority over employer accounts
Visa holders and accidental Americans, only recently aware of FATCA obligations
First-time Form 8938 filers who are trying to understand the stakes before filing this year

What Does This Mean for U.S. Taxpayers Abroad?

Three practical takeaways stand out.

Your legal obligation is unchanged: Form 8938 is still required for every U.S. taxpayer who meets the reporting threshold. Lower enforcement intensity at the very top end does not create a safe harbor for anyone else, and the statute of limitations on an unfiled Form 8938 stays open until you file.
FATCA’s data pipeline continues to run: Foreign banks and investment firms continue to report U.S. account holder information directly to the IRS. The agency receives the data regardless of how many revenue agents it has available to act on it. A drop in examinations is not the same as a drop in visibility.
TIGTA reports often drive policy pressure: When the IRS’s own watchdog goes on record calling enforcement inadequate, congressional and Treasury attention frequently follows. Today’s enforcement gap could narrow quickly if budget priorities or political pressure shift.

The 164 cases TIGTA flagged as egregious had average balances of around $1.7 billion. Most U.S. expats are nowhere near that range. But the rules apply the same way at $200,000 in foreign assets as they do at $200 million, and the penalty structure does not scale down for smaller accounts.

What Should You Do Next?

The right next step depends on where you stand right now.

If you are current on Form 8938, keep filing each year you meet the threshold. The form attaches to your Form 1040 or 1040-SR. Confirm your account totals at the highest point during the year, not just the year-end balance.
If you missed prior years and the omission was non-willful, the IRS Streamlined Filing Procedures let eligible taxpayers catch up on unreported foreign assets with reduced or no penalties. Our streamlined filing guide walks through who qualifies and what the process looks like.
If you are unsure whether your accounts are reportable, review the threshold rules and exempt asset categories before filing. The FATCA exemptions page covers what is excluded, and the FBAR vs. Form 8938 comparison explains where the two reports overlap.
If the IRS has already contacted you: Do not start a streamlined submission on your own. Once an examination or notice is in motion, eligibility rules shift, and a qualified international tax professional should review your options before you respond.

U.S. Taxpayers With Foreign Accounts Have Real Options

Greenback helps you understand your reporting obligations and choose the right compliance path.

The information in this article is for general informational purposes only and does not constitute tax, legal, or financial advice. Tax rules are complex and change frequently. Consult a qualified tax professional regarding your specific situation before taking any action.