IRS Streamlined Filing Procedure: A Complete Guide for US Expats Living in the UK

One of the most common situations faced by US citizens living in London and across the UK is discovering — often years later — that they were required to file US tax returns and foreign account reports, even while paying full UK tax.

Many Americans move to the UK believing that once they leave the United States, their US tax obligations cease. That assumption is incorrect.

The IRS Streamlined Foreign Offshore Procedure was introduced to help non-resident taxpayers correct non-willful non-compliance. For eligible individuals, it can eliminate severe penalty exposure.

This guide explains how the procedure works in 2026 and when it should — and should not — be used.

Why So Many US Expats in London Fall Behind

Common reasons include:

• Lack of awareness of citizenship-based taxation
• Reliance on UK-only accountants
• Incorrect advice from employers
• Assumption that UK tax treaties eliminate filing requirements
• Failure to understand FBAR reporting

It is entirely possible to owe no US tax but still be non-compliant due to missed reporting.

What Is the IRS Streamlined Foreign Offshore Procedure?

The Streamlined Foreign Offshore Procedure (SFOP) allows eligible taxpayers living outside the US to:

• File the last 3 years of US federal tax returns
• File the last 6 years of FBARs (FinCEN Form 114)
• Certify that non-compliance was non-willful

If accepted, penalties for failure to file FBAR are typically waived.

Eligibility Requirements

To qualify, you must:

1. Reside outside the United States
2. Meet the non-residency requirement (generally 330 full days abroad)
3. Certify that failures were non-willful

Non-willful means conduct due to negligence, inadvertence, mistake or misunderstanding — not intentional concealment.

What Does “Non-Willful” Actually Mean?

This is one of the most critical aspects of the submission.

The IRS requires a written certification explaining:

• Why filings were missed
• When you became aware of the obligation
• Why the conduct was not deliberate

Poorly drafted certifications can trigger audit or rejection.

What Must Be Filed?

1. Three Years of Federal Tax Returns

This includes:

• Form 1040
• Foreign earned income exclusion (if applicable)
• Foreign tax credits
• Informational forms (Form 8938, Form 5471, Form 8621 etc.)

2. Six Years of FBARs

Reporting all foreign financial accounts exceeding $10,000 aggregate.

3. Form 14653 Certification Statement

Formal declaration of non-willfulness.

Penalty Exposure Outside the Streamlined Procedure

Without using Streamlined, potential exposure may include:

• $10,000 per non-willful FBAR violation
• Higher penalties for willful violations
• Failure-to-file penalties on tax returns
• Accuracy-related penalties

For London-based professionals with significant account balances, theoretical exposure can be very high.

When Streamlined Is Not Appropriate

The procedure is not suitable if:

• There was intentional concealment
• Offshore structures were used deliberately to avoid tax
• IRS has already initiated examination

In those cases, alternative voluntary disclosure routes may apply.

Interaction with UK Tax Returns

Streamlined submissions often require coordination with:

• UK Self Assessment returns
• UK capital gains calculations
• Pension reporting
• Corporate structures

Currency conversion consistency is critical.

Special Issues for London-Based Professionals

Many US expats in London work in:

• Investment banking
• Private equity
• Technology startups
• Consulting
• Law

Complex compensation (stock options, RSUs, carried interest) increases reporting complexity.

Failure to report foreign investment accounts frequently overlaps with PFIC reporting issues.

Owning a UK Limited Company

If you own a UK Ltd company, you may also have failed to file:

• Form 5471
• GILTI disclosures
• Subpart F income

These forms carry $10,000+ penalties per year if omitted.

Streamlined submissions must address these properly.

The Submission Process Step-by-Step

1. Gather six years of foreign account data
2. Obtain UK tax returns and income records
3. Prepare three years of amended or delinquent US returns
4. Draft detailed non-willfulness statement
5. Submit electronically and retain documentation

Professional preparation reduces audit risk.

How Long Does It Take?

Preparation often takes several weeks due to:

• Account data retrieval
• Exchange rate calculations
• Informational form preparation
• Drafting certification narrative

Rushed submissions increase risk.

After Submission: What Happens?

The IRS may:

• Accept without correspondence
• Request clarification
• Initiate examination (rare but possible)

Retention of supporting documentation is essential.

Why Early Action in 2026 Is Important

Delays increase risk:

• IRS data-sharing under FATCA continues
• UK financial institutions report to US authorities
• Discovery before voluntary submission may eliminate eligibility

Taking proactive action before enforcement contact is crucial.

How Xerxes Associates LLP Assists US Expats in London

Xerxes Associates LLP supports clients across London and the UK with:

• Streamlined eligibility assessment
• Preparation of delinquent US returns
• FBAR reconstruction
• Certification drafting

Confidential, structured compliance reduces penalty exposure and restores peace of mind.

A Strategic Opportunity to Reset Compliance

For US citizens living in London who have fallen behind, the Streamlined Procedure offers a structured route back into compliance.

However, the process must be handled carefully. Improper submissions can escalate matters rather than resolve them.

If you suspect prior non-compliance, early professional review in 2026 is advisable before IRS enforcement mechanisms intervene.