The Risks of Using AI for Your US Expat Taxes

Artificial intelligence tools like ChatGPT have exploded in popularity because it’s so easy to ask them anything. We see more and more Americans living abroad using these tools for one of the most confusing topics of all: US expat taxes.

But as powerful as AI may be, it’s not a licensed tax professional. For US citizens abroad, where tax rules are unusually complex and the risks of mistakes are high, relying on AI could be a costly misstep.

Here’s why you should think twice before trusting ChatGPT (or any AI tool) to prepare, review, or advise on your expat tax return – and when it can be useful, with the right precautions.

• What makes ChatGPT so appealing for expats navigating US Taxes
• Expat taxes are exceptionally complex
• Top 10 risks of using ChatGPT for your expat taxes
• When AI can be helpful for expats (with caution)
• Why bombarding your tax CPA with ChatGPT questions may be counterproductive
• Best practices for using AI tools for tax help
• AI is powerful but not best suited for expat taxes

Let’s get started.

What makes ChatGPT so appealing for expats navigating US Taxes

AI is so ubiquitous these days, that people use them for almost everything, even for taxes. You might have asked it for a simple explanation of the Fo reign Earned Income Exclusion (FEIE), or for very complex tasks like navigating a tax treaty.

These tools provide:

• Instant answers at any time of day
• Clear explanations of IRS forms and tax terms
• Free access with no appointment or cost barrier

Sounds great, right? But what’s often missing is accuracy, context, and professional accountability.

Expat taxes are exceptionally complex

Unlike most countries, the US has citizenship-based taxation, so it taxes its citizens no matter where they live. If you’re a US citizen or Green Card holder living abroad, you must file a US tax return every year, even if you don’t owe any tax.

Common expat tax issues include:

• Claiming the Foreign Earned Income Exclusion (Form 2555)
• Claiming the Foreign Tax Credit (Form 1116)
• Filing FBARs and FATCA disclosures (Forms FinCEN114 and 8938)
• Navigating tax treaties, social security totalization agreements, and dual-taxation
• Determining state tax residency even when living abroad
• Handling self-employment or foreign corporations

Each of these comes with its own set of rules and exceptions. If you file something wrong, you could trigger an audit or miss out on thousands in exclusions and credits.

Top 10 risks of using ChatGPT for your expat taxes

1. Lack of personal context

AI doesn’t know your filing history, residency status, visa type, or specific income sources. Those can all materially affect your tax liability.

2. No professional liability

ChatGPT is not a licensed CPA, EA, or attorney. It doesn’t carry professional liability insurance. If its answer is wrong, there’s no one to defend you in an audit or cover your penalties.

3. Generic, one-size-fits-all advice

Tax answers are often simplified and may not apply to your country of residence. For example, the US-France treaty benefits differ vastly from those with the UAE or Thailand.

4. Outdated information

ChatGPT may not reflect the latest IRS thresholds, form changes, or procedural updates. U.S. tax laws shift annually, sometimes more often.

5. Data privacy risks

Entering sensitive info like your SSN, bank balances, or foreign account numbers into a public AI tool could compromise your data security.

6. Wrong or incomplete prompts

If your prompts don’t reflect the complete correct context of your tax situation, the answer is likely not correct or complete either. You don’t know what you don’t know (and you’re not expected to know it but a licensed tax accountant is).

7. Misinterpretation of IRS forms

AI can’t read or validate your Form 2555 or Form 1116 line by line. It won’t flag errors, omissions, or misapplied credits. AI sometimes suggests the wrong forms entirely, or misexplains them. This is especially an issue with complex filings like Form 5471 (foreign corporations) or PFIC disclosures.

8. False sense of security

The confidence in an AI-generated answer can lull users into thinking they’ve covered everything. But critical filings like the FBAR are often completely missed.

9. Neglect of state tax issues

AI often ignores state residency rules — like maintaining a driver’s license or address — which can leave expats exposed to unexpected state tax bills.

10. Penalties are real

The IRS can impose steep fines for missed disclosures (e.g., $10,000+ for an unfiled FBAR). AI won’t be there to negotiate a penalty abatement on your behalf.

When AI can be helpful for expats (with caution)

AI of course has its place. You can use it to:

• Understand general concepts like the difference between FEIE and FTC
• Research deadlines and forms you might need to file
• Clarify tax treaty terms or publication references

But it should be a starting point, not your only resource. Never rely on AI to prepare, review, or finalize your tax return, especially with international complexities.

Why bombarding your tax CPA with ChatGPT questions may be counterproductive

It’s natural to want to double-check advice or get a second opinion, especially when it’s free and instantly available. But when you start feeding ChatGPT’s answers back to your tax advisor, it may lead you off track. It can slow down your return or make it harder to get the right result. 

The key issues are:

1. AI doesn’t understand your entire tax profile

Your CPA is working from a full picture: prior-year returns, residency tests, tax treaties, deadlines, and other info you provided, in a questionnaire, consultation, or email exchange. ChatGPT, by contrast, is working with limited, generalized prompts. When you send ChatGPT’s answers to your accountant, it can introduce irrelevant or incorrect assumptions that muddy the waters.

2. You may be comparing apples to oranges

AI might give an answer based on a different situation than yours, maybe a different country, income source, filing status, or even visa type. That can lead to perceived “discrepancies” that aren’t actually discrepancies at all, but just different contexts.

3. It distracts from what matters

Instead of focusing on preparing or reviewing your return, your CPA may now have to spend valuable time debunking AI-generated confusion. This delays progress and can increase the time it takes to finalize your return for something that adds no value to the outcome. And even worse, this can increase the fees your accountant has to charge.

4. You’re not getting a second opinion — You’re getting a guess

ChatGPT can sound confident, even when it’s wrong. So flagging AI-generated differences isn’t necessarily helpful to your tax advisor. It’s only time-consuming. And it’s confusing for you.

5. It undermines the collaborative process

The best outcomes happen when you and your tax professional are aligned. Trusting your CPA’s experience and communicating clearly about your real-life situation leads to a better return, faster. If you’re unsure about something, ask your CPA directly rather than quoting AI.

Tip: When using AI for expat tax questions, make sure that you provide enough context in your prompt and review the output before sending it to your tax professional. If something looks unclear, feel free to ask questions — we’re here to help! But sending over full, unfiltered transcripts or documents without reviewing them first often leads to extra work (and costs).

Best practices for using AI tools for tax help

1. Never share private financial info (SSN, bank data, etc.) with public AI.
2. Use AI for learning, not filing. Read IRS publications, then confirm with a tax pro.
3. Get your return professionally prepared and reviewed, especially if you claim FEIE, FTC, or have foreign accounts/businesses.
4. Watch for oversimplified or misleading answers. If it sounds too easy, it probably is.
5. Hire a tax advisor who understands expat issues. ChatGPT doesn’t represent you before the IRS — but a tax professional can.

AI is powerful but not best suited for expat taxes

ChatGPT is a powerful tool, but when it comes to your US expat taxes, it’s not a substitute for professional advice. The stakes are too high, the rules too nuanced, and the penalties too steep.

A qualified tax advisor will understand your personal situation, spot the landmines, and keep you compliant — all while helping you pay only what you owe, not a penny more.

Use AI to educate yourself, but when it comes time to file, let a real expert guide the way.