TITLE: IRS Increases Nonfiler Enforcement: What International Sellers Need to Know Now
The IRS is preparing to intensify enforcement against taxpayers and businesses that do not file required returns. International sellers with U.S. entities, inventory, marketplace activity, or related-party transactions should review their filing position now.
This update follows a 31 August 2026 TIGTA report and a 4 September 2026 IRS Security Summit warning. Together, they show a stronger focus on identifying nonfilers, progressing dormant cases, improving offshore information reporting, and securing online tax accounts.
Do not worry if your business has missed a filing. The important step is to identify the gap and act promptly.
Understand why nonfiler enforcement is increasing
TIGTA Report 2026-308-047, Agencywide Coordination Could Enhance the IRS’s Approach to Nonfilers, identified a significant increase in potential nonfilers:
- Potential nonfilers increased from 8.8 million for tax year 2015 to 14.7 million for tax year 2022.
- The projected gross tax gap for tax year 2022 was approximately $696 billion.
- Around $63 billion, or 9%, was attributed to nonfilers.
The IRS agreed to all six TIGTA recommendations. These include:
- Creating an agencywide Nonfiler Strategy with executive oversight.
- Prioritising the highest-risk nonfiler populations.
- Adding nonfiler performance metrics.
- Improving coordination across IRS functions.
- Removing a first-notice status hold that delayed case progression.
The IRS moved affected cases out of first-notice status in March 2026. This matters because cases that previously remained dormant may now progress to examination, assessment, collection, or penalty action.
TIGTA’s official report listing provides access to current oversight publications.
Prepare for earlier, data-led IRS contact
The IRS is using analytics, automation, and artificial intelligence to identify potential noncompliance earlier. Lia Colbert, Commissioner of the IRS Small Business/Self-Employed Division, confirmed that technology is being used to improve how nonfiler cases are identified and prioritised.
A small business should not assume that low turnover prevents enforcement. The IRS may assess risk using data from:
- Payment processors.
- Amazon, Shopify, and other marketplaces.
- Customs and import records.
- Bank and financial information.
- Employer identification number records.
- Related-party transactions.
- Information returns.
- FATCA reporting.
- Previous IRS correspondence.
The IRS high-income nonfiler initiative provides additional context. As of 30 June 2025, 38,824 high-priority cases involving 33,653 taxpayers remained in first-notice status. Those cases represented approximately $15.7 billion in potential assessments. The IRS moved them forward in March 2026.
Willful failure to file can also be a criminal offence under Internal Revenue Code section 7203. Not every late or missed filing is criminal. However, intentional nonfiling creates substantially greater risk than an administrative delay.
Review every U.S. filing obligation
Create a complete entity-by-entity filing map. This will help you identify obligations that may not appear in your UK bookkeeping records.
Check Form 1120-F for foreign corporations
A foreign corporation may need to file Form 1120-F if it:
- Conducts a trade or business in the United States.
- Has income effectively connected with a U.S. trade or business.
- Operates through a U.S. branch, agent, warehouse, or other arrangement.
- Has U.S.-source income that is not fully covered by withholding.
The IRS Form 1120-F guidance explains the main filing circumstances.
Do not decide based only on the location of your customers. Review inventory ownership, fulfilment arrangements, contracts, personnel, agents, and the entity recording U.S. sales.
If you are one of the us importers of record for your goods, retain customs entries and supporting records. Importer-of-record status does not automatically determine your income tax filing obligation, but it may help establish which entity imports, owns, and moves inventory.
Check Form 5472 and the pro forma Form 1120
A foreign-owned U.S. disregarded entity, such as a single-member LLC owned by a non-U.S. person, generally must file:
- Form 5472.
- A pro forma Form 1120 attached to Form 5472.
This can apply even where the LLC has no separate U.S. income tax return requirement.
Common reportable transactions include:
- Capital contributions.
- Owner withdrawals.
- Intercompany loans.
- Inventory purchases.
- Management fees.
- Reimbursements.
- Rent and insurance payments.
- Interest and other related-party payments.
The IRS states that failure to file a complete and correct Form 5472 can result in a $25,000 penalty per failure. Additional continuation penalties may apply after an IRS notice, with no maximum penalty amount.
Review the IRS Form 5472 instructions, Form 1120 instructions, and international information reporting penalties.
Check FBAR, Form 8938, and other information returns
TIGTA also reported weaknesses in the IRS’s handling of high-balance FATCA/Form 8938 offshore nonfilers. Under Campaign 896, only 12 of 405 identified cases had been examined.
This does not mean that every foreign seller must file Form 8938 or an FBAR. These obligations depend on the taxpayer’s status, ownership, account balances, and other facts.
However, you should check whether the following apply:
- FBAR, also known as FinCEN Form 114.
- Form 8938, Statement of Specified Foreign Financial Assets.
- Foreign corporation information returns.
- Partnership or shareholder information reporting.
- FATCA-related reporting.
- FIRPTA withholding, where U.S. real property interests are involved.
Treat these forms as separate compliance workstreams. Filing one return does not automatically satisfy another obligation.
File late returns promptly and preserve your records
If you discover a missed return, do not wait for an IRS notice before taking action.
Prepare a filing recovery checklist:
-
List every U.S.-connected entity.
Include LLCs, corporations, branches, and foreign companies with U.S. activities. -
Identify every missed period.
Check federal returns, information returns, FBAR filings, and state-level obligations separately. -
Reconcile the underlying data.
Match marketplace statements, payment processor reports, bank records, customs documents, inventory movements, and intercompany transactions. -
Prepare and submit the outstanding filings.
Proactive filing may reduce the risk of penalties and demonstrates good-faith compliance to the IRS.
Preserve all supporting documentation, including contracts, invoices, shipping records, and correspondence. If the IRS contacts you, having organised records will make the response process faster and more accurate.
Taking prompt corrective action is the most effective way to mitigate exposure. With enforcement ramping up, reviewing your U.S. filing obligations now is a prudent step for any international seller with a U.S. presence.
