A Possible Turning Point for Americans Abroad: What the Taxpayer Assistance and Service Act Signals for Cross-Border Tax Compliance

For Americans living abroad and families whose financial lives cross national borders, U.S. tax compliance can feel as though it was designed as a collection of separate systems rather than as one coordinated process. A single foreign bank or investment account may have to be disclosed on both FinCEN Form 114, commonly called the FBAR, and Form 8938. A foreign retirement arrangement may raise questions under several different reporting regimes. Notices may travel slowly through international mail, while taxpayers have limited time to respond. Even when no significant U.S. income tax is due, the cost and complexity of reporting can be substantial.

The proposed Taxpayer Assistance and Service Act would not replace citizenship-based taxation, repeal the FBAR, eliminate Form 8938, or create a broad exemption for Americans overseas. Nevertheless, it shows that lawmakers are recognizing several long-standing problems: duplicative reporting, disproportionate compliance burdens, limited procedural protections, international communication delays, and an IRS system that remains too dependent on paper.

The proposal therefore may be more significant as an indication of future direction than as an immediate overhaul of international tax law.

-A proposal, not current law-

The Joint Committee on Taxation released its description of the chairman’s mark of the Taxpayer Assistance and Service Act on July 28, 2026, in advance of a scheduled Senate Finance Committee markup on July 30. A chairman’s modification released on July 29 added further provisions, including the proposed Fairness in Foreign Filing Act.

These measures remain proposals. Taxpayers should continue following existing filing requirements, deadlines, and procedures unless legislation is enacted and applicable regulations or guidance are issued. Still, the proposals provide a useful view of the issues Congress may prioritize in the coming years.

-Combining FBAR and tax-return reporting-

One of the proposal’s most notable cross-border provisions concerns overlapping foreign financial account reporting.

Under current law, the FBAR is filed with the Financial Crimes Enforcement Network under the Bank Secrecy Act. Form 8938, by contrast, is filed with an income tax return under Internal Revenue Code Section 6038D. The two filings have different thresholds, definitions, exceptions, filing systems, and penalty structures. They also do not cover exactly the same assets.

As a result, the same foreign account may have to be reported twice, but the taxpayer cannot simply copy one form onto the other. This creates a risk of misunderstanding the systems or reporting inconsistent information.

The proposal would require the Treasury Secretary, within 180 days after enactment, to study and report to Congress on how to combine and simplify international information reporting under the Internal Revenue Code and the Bank Secrecy Act. The study would also address eliminating duplicative information requests imposed on U.S. citizens living outside the United States. Treasury would be required to obtain input from the National Taxpayer Advocate and Americans abroad, identify administrative actions it has taken, explain statutory obstacles, and recommend necessary legislative changes.

This provision would not itself merge the FBAR and Form 8938. Nor would it immediately increase the FBAR’s $10,000 aggregate reporting threshold. Its importance lies in Congress formally directing Treasury to examine whether two historically separate systems can be made more coherent.

Future legislation might eventually produce a common filing portal, harmonized definitions, coordinated thresholds, or a system under which information reported once need not be repeated. None is guaranteed, but the proposal places consolidation and simplification on the policy agenda.

-A broader examination of the burdens facing Americans abroad-

A second study would look beyond FBAR and Form 8938.

The Comptroller General would be required to examine the compliance burdens faced by U.S. citizens and residents living outside the United States, including low- and moderate-income individuals. The study would specifically consider difficulties understanding federal tax and information-return obligations, the treatment of foreign retirement accounts, foreign-currency gains, communications with the IRS and FinCEN, access to financial services, the affordability of professional tax preparation, and burdens that are disproportionate to the amount of U.S. tax owed.

A retirement or investment product that is ordinary in Japan, the United Kingdom, Canada, Australia, or another country may fit poorly within U.S. tax classifications. A taxpayer may owe little or no U.S. tax after applying the foreign tax credit or foreign earned income exclusion but still face multiple complex information returns and potentially severe penalties.

The Comptroller General would issue a public report within one year after enactment. Treasury would then have another year to report what it had done and what additional legislation would be necessary.

The study would not immediately simplify PFIC reporting, exempt foreign pensions, or eliminate Forms 3520, 3520-A, 5471, 8621, or 8854. It nevertheless suggests that compliance policy may increasingly consider both the taxpayer’s risk and the practical burden imposed.

-A proposed right to pre-assessment Appeals review-

The July 29 chairman’s modification adds a particularly consequential proposal: the Fairness in Foreign Filing Act.

International information-return penalties can be substantial and, in many cases, the IRS presently treats them as immediately assessable. A taxpayer may receive an assessment and demand for payment before having a guaranteed opportunity for independent administrative review. The taxpayer may then have to seek review through collection procedures or pay the penalty and pursue a refund claim.

The proposed provision would establish pre-assessment administrative review for specified international information-reporting penalties. Covered provisions would include penalties under Sections 6038, 6038A, 6038B, 6038C, 6038D, 6039F, and 6677. These provisions can involve interests in foreign corporations and partnerships, transfers to foreign entities, specified foreign financial assets reported on Form 8938, large gifts from foreign persons, and foreign trusts.

Before assessing a covered penalty, the IRS generally would have to mail a written notice identifying the proposed penalty, its basis, and the relevant year or period. The taxpayer would be informed of the right to request review by the IRS Independent Office of Appeals.

The review period would generally be 60 days, but it would be extended to 120 days when the notice is addressed to a taxpayer outside the United States. Assessment and collection generally would be suspended during the response period and, if review is requested, until Appeals reaches a determination.

This could be a meaningful procedural safeguard. It would not erase penalties or guarantee that reasonable-cause arguments will prevail, but it would allow taxpayers to present defenses before assessment and collection.

The same modification would also clarify the IRS’s authority to administratively assess Code penalties, effectively addressing litigation concerning whether certain international reporting penalties are assessable without a civil collection lawsuit. Thus, the proposal combines stronger IRS assessment authority with a more formal pre-assessment review process. Taxpayers would gain a procedural opportunity, but the government’s underlying enforcement authority would also become clearer.

- Possible changes to foreign-trust and foreign-gift deadlines-

The Fairness in Foreign Filing Act would repeal special off-Code statutory deadlines governing reports under Sections 6048 and 6039F, which concern foreign trusts and certain large gifts from foreign persons. Treasury would regain authority to establish the applicable deadlines through regulations.

The goal is to align international reporting more closely with normal tax-return deadlines and reduce inadvertent late filings. The repeal would apply to returns for taxable years beginning after December 31, 2026, if enacted. It would not eliminate foreign-trust or foreign-gift reporting; future deadlines would depend on Treasury guidance.

-More time to answer math-error notices sent abroad-

Another provision would address the realities of international mail.

When the IRS makes a math- or clerical-error adjustment, it may immediately assess additional tax without first issuing a notice of deficiency. A taxpayer generally has 60 days to request abatement. If the request is timely, the IRS must reverse the summary assessment and may then examine the issue under ordinary deficiency procedures.

The proposal would extend the response period to 120 days when the notice is sent to an address outside the United States. This change would apply to notices sent more than 180 days after enactment.

A notice may be delayed in international delivery, forwarded from an old address, or received while the taxpayer is traveling. Doubling the response period would better preserve the ability to contest an adjustment before losing important procedural rights.

-A more digital IRS for globally mobile taxpayers-

Several provisions are not limited to cross-border taxpayers but could be especially valuable to them.

The proposal would expand IRS online accounts so taxpayers, including those living abroad, could view returns, documents, notices, and letters covering the preceding six years. Authorized practitioners could also receive access, subject to the taxpayer’s authorization. Taxpayers and representatives would be able to upload responses to IRS correspondence electronically.

The IRS would also provide more detailed electronic information about the status of original and amended returns, including whether a return was received, processed, suspended, or awaiting additional information. This could be particularly useful when an international taxpayer files a paper return, dual-status return, amended return, or a submission containing international attachments.

The proposal also contemplates broader electronic filing and electronic processing of returns and amendments, together with optical character recognition for paper returns and correspondence. A separate electronic mailbox rule would protect certain filings and payments authorized by the due date but received and processed within three business days.

In addition, Congress would express the view that IRS callback service should ultimately be available to taxpayers outside the United States. Although this appears less enforceable than a direct statutory requirement, it expressly acknowledges that taxpayers abroad need meaningful access to IRS assistance.

These changes point toward interaction through secure digital accounts rather than international mail, repeated faxes, and telephone calls across time zones.

-What future trend does the proposal suggest?-

Taken together, the cross-border provisions suggest five developing trends.

First, the government may move toward consolidating duplicative reporting rather than adding another separate form. Second, lawmakers appear increasingly aware that Americans abroad experience unique timing, communication, and access problems. Third, international penalties may be paired with clearer pre-assessment procedural rights, even while the IRS’s authority to impose those penalties is strengthened. Fourth, foreign trusts, pensions, financial assets, and currency issues are being recognized as areas in need of simplification. Finally, digital administration is likely to become the primary way taxpayers submit documents, track cases, receive notices, and communicate with the IRS.

This does not mean cross-border compliance will soon become simple. International reporting remains a major enforcement priority, and the proposal does not reduce the need for accurate and timely filings. In fact, better-integrated data and digital systems could make inconsistencies easier for the government to identify.

The likely direction is therefore not reduced enforcement. It is more coordinated reporting, more electronic administration, and potentially fairer procedures.

-What cross-border families should do now-

Taxpayers should not postpone required filings in anticipation of legislative relief. Current FBAR, Form 8938, foreign-trust, foreign-gift, PFIC, foreign-corporation, and expatriation requirements remain applicable.

Cross-border families should maintain records of foreign accounts, investments, pensions, entities, trusts, gifts, and changes in residency or immigration status. They should keep their IRS address current, retain proof of submissions, and respond promptly to notices.

At the same time, taxpayers and professionals should watch this legislation carefully. If enacted, some provisions could produce immediate procedural rights, while others would begin studies and regulatory processes that may shape international tax administration for years.

The Taxpayer Assistance and Service Act does not yet offer a comprehensive solution for Americans abroad. But it may mark an important shift: cross-border compliance is no longer being viewed only as an enforcement question. Congress is also beginning to examine whether the system is understandable, proportionate, accessible, and procedurally fair.

*This article is provided for general informational and educational purposes only and does not constitute legal, tax, accounting, or investment advice. The legislation discussed is proposed and may be revised, delayed, or not enacted. Its application would depend on final statutory language, effective dates, regulations, and administrative guidance. Readers should consult qualified advisers regarding their individual circumstances before taking action.*