Behind on US Taxes After Taking a London Job Package? How Streamlined Filing Works
If you are behind on US taxes and taking a London job package, the IRS Streamlined Foreign Offshore Procedures usually let you catch up with zero penalties: three amended or late returns, six years of FBARs, and a signed non-wilfulness certification. Most Londoners on a local contract qualify.
By the TaxYork US-UK Tax Team — reviewed by a US-UK dual-qualified adviser (CPA / Enrolled Agent).
Why does moving to London leave so many Americans behind on their US filings?
The United States taxes its citizens and green card holders on worldwide income, regardless of where they live or where the income is earned. Accepting a role in Canary Wharf or the City does not switch that obligation off. HMRC will tax your London salary, but the IRS still expects a full Form 1040 every year, and the two systems run in parallel rather than canceling each other out. The IRS spells this out plainly in its guidance for US citizens and resident aliens abroad.
Here is where the trouble starts. A recruiter waves a generous relocation package under your nose, you sign, you fly over, and for the next two or three years, your entire financial life is British: a Barclays current account, a workplace pension, a mortgage in pounds. Nobody at the office mentions Washington. By the time a friend casually asks whether you are still filing in the States, you are three returns and several FBARs behind and quietly panicking. This is the single most common way clients end up behind on US taxes: taking a London job package, and it rarely reflects bad faith.
The good news is that the IRS has created a specific amnesty program for exactly this situation. It was designed for honest people who simply did not know, and it is far gentler than the enforcement headlines suggest. For a fuller walk-through of the mechanics, our guide to the Streamlined Foreign Offshore Procedures covers each form in turn.
What exactly does a London job package add to the US tax picture?
A relocation package is rarely just salary. Each component carries its own US treatment, and several of them create reporting duties that a domestic American employee never encounters. Below is a quick map of the pieces that most often catch people out.
Package element
US tax angle you cannot ignore
Signing bonus
Fully taxable US income in the year received, even if paid into a UK account.
Relocation and cost-of-living allowances
Generally, for US tax purposes, the old moving-expense deduction is no longer available to filers.
Housing allowance
Taxable, though the foreign housing exclusion may offset part of it.
Tax equalisation
Employer-paid UK tax is itself taxable US income; the gross-up can balloon quickly.
RSUs and share options
Vesting and exercise events are US-taxable; timing and sourcing get complicated fast.
Employer pension
Contributions and growth may be reportable; treaty positions often apply.
UK bank and investment accounts
Trigger FBAR and possibly Form 8938 once thresholds are crossed.
Take share awards as an example. If your London package includes restricted stock units, the vesting date is a taxable event for the IRS regardless of what HMRC does, and the interaction between the two calendars can produce a nasty mismatch. We unpack this in detail in our note on RSUs and stock options under US tax.
The account reporting trap: FBAR and Form 8938
The moment your combined foreign accounts top 10,000 US dollars at any point in the year, you must file an FBAR (FinCEN Form 114). That threshold is an aggregate across all accounts, and it is low enough that a single month's salary can exceed it. The IRS explains the mechanics on its FBAR reporting page. A separate, higher-threshold form, Form 8938, applies under FATCA for larger balances.
Miss these, and the stated penalties are eye-watering. A non-wilful FBAR failure can reach 16,536 US dollars for 2026, while a wilful one runs to the greater of 165,353 US dollars or half the account balance. The Supreme Court's Bittner decision softened the non-wilful side by confirming the penalty applies per annual report rather than per account, but the figures still concentrate the mind. Our breakdown of FBAR penalties explained shows how these numbers actually play out.
One more landmine hides in plain sight. If you tidied up your finances by buying a UK-based index fund or investment trust, you may now own a Passive Foreign Investment Company, which is subject to the punitive Form 8621 regime. Many newcomers create this problem for themselves within weeks of arriving, entirely unaware of it.
How does the Streamlined route help someone who is behind on US taxes take a London job package?
The Streamlined Foreign Offshore Procedures are the IRS's flagship amnesty for Americans abroad, and they carry a headline benefit: a zero per cent miscellaneous penalty. Someone who is behind on US taxes, taking a London job package, and filing through this route, pays the tax due plus interest but avoids any failure-to-file, failure-to-pay, or FBAR penalty. The IRS sets out the full framework on its Streamlined Filing Compliance Procedures page.
To use the foreign version rather than the domestic one, you must clear a non-residency test. In broad terms, you need no US abode and at least 330 full days spent outside the United States in one or more of the last three years. A professional who relocated to London on a local UK employment contract almost always satisfies this comfortably, which is precisely why the route fits this scenario so neatly.
What you actually file
The submission has three moving parts, and getting the combination right matters more than any single form:
Component
What it covers
3 years of tax returns
The three most recent years past due, filed or amended, with all foreign income reported.
6 years of FBARs
Filed electronically through FinCEN for the six most recent years.
Form 14653
A signed certification confirming that your failures were non-wilful, accompanied by a written narrative explaining why.
The pivot of the entire application is non-wilfulness. Form 14653 asks you to certify, under penalty of perjury, that your lapse resulted from a good-faith misunderstanding rather than a deliberate choice to hide income. The narrative is not a box-ticking exercise; it is the heart of the file, and a weak or careless one is the fastest way to jeopardize an otherwise strong claim. Anyone who is genuinely behind on US taxes and takes a London job package because their employer never flagged the US angle usually has a clean, credible story to tell here.
Will you actually owe the IRS anything once you catch up?
This is the question that keeps people awake, and the answer surprises most of them: usually very little, and often nothing. Two reliefs do the heavy lifting once your returns are prepared correctly.
The first is the foreign earned income exclusion under section 911, which lets you exclude up to 132,900 US dollars of earned income for 2026. The statutory basis sits in Internal Revenue Code section 911, and the IRS explains eligibility on its foreign earned income exclusion page. The second is the foreign tax credit, claimed on Form 1116, which offsets your US bill dollar-for-dollar with the UK tax you have already paid. Because UK rates on higher earnings sit above US rates, the credit frequently wipes out the remaining liability entirely.
Choosing between the two, or combining them, is a genuine planning decision rather than an afterthought. Lean too hard on the exclusion, and you can strand foreign tax credits you would rather have banked for a future high-income year; lean on the credit alone, and you may leave part of the exclusion unused. We compare the trade-offs in our piece on the FEIE versus the foreign tax credit, and the right answer depends on your income mix, your family situation, and your longer-term plans. Because catching up locks in the elections you make on those three back years, it pays to model the choice before you sign the returns rather than after.
Social security is the other pleasant surprise. Thanks to the US-UK totalisation agreement, you generally pay into only one country's system rather than both, so you are not stung for FICA on top of National Insurance. The Social Security Administration summarises the deal in its US-UK agreement pamphlet. If you want the broader London context, our overview of US expat tax in London ties these threads together.
A short case study: Maya's three lost years
Maya, a software engineer, moved from Austin to London in 2022 on a package that bundled a signing bonus, an RSU grant, and a housing allowance. Nobody mentioned the US filing, so she stopped. By spring 2026, she had three unfiled returns, six years of unreported ISA and current-account balances, and a mild panic after reading a scare story online. She had also, without realizing it, bought a UK equity fund that qualified as a PFIC.
We ran her through the Streamlined Foreign Offshore Procedures. She had spent well over 330 days a year in the UK, so she met the non-residency test with room to spare. Across the three years, the foreign earned income exclusion covered most of her salary, and the foreign tax credit mopped up the rest, including the tax on her vested shares. Her final US liability came to a few hundred dollars in interest. The FBAR penalty was zero. Her HMRC position, incidentally, is set out in the UK government's own tax on foreign income guidance, which we cross-checked against her Self Assessment. Six weeks of careful work turned a source of dread into a closed chapter.
Speak to TaxYork before you file anything.
Catching up is very doable, but the Streamlined route is unforgiving of a sloppy submission, and a botched non-wilfulness narrative can cost you the penalty relief entirely. If you are behind on US taxes and taking a London job package, get a second pair of expert eyes on the file first. Email hello@taxyork.com, call 020 3488 8606, or visit taxyork.com to arrange a confidential review with a US-UK specialist.