IRS Streamlined Filing Procedures: how Americans in the UK catch up

The Streamlined Filing Compliance Procedures are the IRS's route back for people who did not file because they did not know they had to. For Americans living in the UK, the Foreign Offshore version is the one that applies, and it is the most favourable compliance route the IRS offers.

Two versions

Foreign Offshore (SFOP) is for people living outside the US. If accepted, no failure-to-file, failure-to-pay, accuracy-related, information-return or FBAR penalties are applied. Tax and statutory interest are still due.

Domestic Offshore (SDOP) is for people living in the US. It carries a 5% miscellaneous offshore penalty on the highest aggregate balance of the unreported assets.

Eligibility for the Foreign Offshore route

• Non-residency. In at least one of the three most recent tax years for which the return due date has passed, you had no US abode and were physically outside the US for at least 330 full days. Joint filers must both meet this. (Non-citizens use a substantial-presence version of the test instead.)
• Non-wilful conduct. The failure arose from negligence, inadvertence, mistake or a good-faith misunderstanding of the law. You certify this under penalties of perjury.
• Not under examination. If the IRS has opened a civil examination or criminal investigation of you for any year, the procedures are not available.
• Unreported foreign income or missed filings. The procedures correct missed income, returns, information returns and FBARs. If you reported all income and only missed FBARs, see the Delinquent FBAR route below.

Use the eligibility checker for a first view.

What is submitted

1. The most recent three years of returns, original (Form 1040) or amended (Form 1040-X), with every information return that should have been attached: Forms 8938, 8621, 5471, 3520, 8833 as relevant. Each page is marked "Streamlined Foreign Offshore" in red.
2. The most recent six years of FBARs, filed electronically through FinCEN with "Streamlined Filing Compliance Procedures" as the late-filing explanation.
3. Form 14653, the certification by a US person residing outside the US, signed and attached to each return.
4. Payment of all tax and interest shown on the returns.
5. Where relevant, late treaty elections for pensions, and an ITIN application if you are not eligible for a Social Security number.

The package is posted to the IRS unit in Austin, Texas; it cannot be e-filed.

The certification matters most

Form 14653 is the document the IRS reads most closely. It must set out specific facts: when and how you came to live abroad, what you understood about US filing, how you learned of the obligation, who advised you and what they said, and the source of the funds in the accounts. A template paragraph is a risk. A truthful, specific account in your own words, prepared carefully, is what the procedures ask for. Nothing we write can turn wilful conduct into non-wilful conduct, and we will tell you if the facts do not fit.

What it costs in tax

For most UK residents the Foreign Tax Credit means little or no US tax is due for the Streamlined years, so the cost is often the preparation fee and some interest. That is not guaranteed: PFIC funds inside ISAs, pension events, property sales and years with low UK tax can all produce US tax. We compute each year before anything is signed.

Processing

The IRS does not send an acceptance letter and publishes no processing time. Returns are processed in the normal way; the absence of penalty notices and the posting of the returns to your account is how acceptance is normally evidenced. Submissions with large balances or complex facts receive more attention.

If you do not qualify

• Delinquent FBAR Submission Procedures: all income was reported, only FBARs were missed.
• Delinquent International Information Return Submission Procedures: missed Forms 5471, 3520 and similar with reasonable cause and no tax effect.
• Filing late with reasonable-cause statements where neither of the above fits.
• The Voluntary Disclosure Practice where conduct may have been wilful; higher penalties, but protection from prosecution.

After Streamlined

The procedures fix the past. From then on you file every year: Form 1040, FBAR and any information returns, alongside UK Self Assessment where required. Most clients find that, once set up properly, the annual position is predictable and the US tax small.

Frequently asked questions

I filed US returns but never did FBARs or reported my UK accounts. Can I use Streamlined?

Yes. Amended returns for the three years replace the originals, and the six FBARs are filed. If the only omission was the FBARs and all income was reported, the Delinquent FBAR route is simpler.

Are the procedures still open?

Yes, as at the date of this article. The IRS has said they are available "for the present time" and can end them without notice.