Do I have to file a US return for a streamlined year that was below the filing threshold?

The Streamlined Foreign Offshore Procedures ask for returns for each of the most recent three years for which the US return due date has passed, with no carve-out for a year in which no return was legally required. We file the year. A filed return starts the section 6501 assessment period running; an unfiled year can be assessed at any time, so omitting it leaves one year permanently open inside an otherwise closed package.

What is the US filing threshold if I am married to a non-US spouse?

If you file as married filing separately, which is usual where a UK spouse is not a US person, the gross income filing threshold in the Publication 501 chart for tax year 2025 is $5 at any age. In practice that means there is no meaningful below-threshold year for you. Thresholds are set annually, so each year in your lookback must be tested against the figures published for that year.

Does the foreign earned income exclusion put me under the filing threshold?

No. Publication 54 states that gross income for the filing test includes any income you can exclude as foreign earned income or as a foreign housing amount. The exclusion is claimed on a filed return, so it cannot remove income from the test that decides whether a return is due. A UK salary that is fully excluded still counts in full when you measure gross income against the threshold for that year.

Do I file Form 8938 for a year when no tax return was required?

The IRS states that if you do not have to file an income tax return for the tax year, you do not need to file Form 8938 even if your specified foreign assets exceed the reporting threshold. The exemption is framed by whether a return was required, not whether one was filed. Where you are filing the year voluntarily and assets clearly exceed the thresholds, including Form 8938 keeps the package consistent.

Can I still owe HMRC a Self Assessment return for that same quiet year?

Yes. UK triggers are independent of the US test. GOV.UK requires a return if you were a sole trader earning more than 1,000 pounds, a partner in a partnership, liable to capital gains tax, or liable to the High Income Child Benefit Charge outside PAYE, among others. Untaxed rental, savings, dividend and foreign income can also apply. Tell HMRC by 5 October following the tax year if you have not filed before.

Streamlined Filing: The Below-Threshold Year

Q: Do I need an FBAR for a year in which I earned almost nothing?

Very likely yes. The FBAR is triggered by the aggregate value of foreign financial accounts exceeding $10,000 at any time in the calendar year, plus a financial interest in or signature or other authority over at least one foreign account. Income is irrelevant to that test. A sabbatical or parental leave year in which balances stayed high, or were drawn down from a high point, is an FBAR year.

A streamlined filing year below threshold is still a year you should almost always file, even though the law did not require a return for it. The Streamlined Foreign Offshore Procedures ask for returns for each of the most recent three years for which the US tax return due date has passed, and the IRS instructions at https://www.irs.gov/individuals/international-taxpayers/u-s-taxpayers-residing-outside-the-united-states do not carve out a year in which your gross income happened to fall under the filing test. In the packages we prepare for UK-resident Americans, the sabbatical year, the start-up year, the parental leave year and the year of nothing but UK-taxed dividends are all filed, because a filed return closes a year and an unfiled year never closes at all.

That single point is the reason this article exists. The failure mode we see most often is a filer who assembles a clean three-year package, leaves out the quiet middle year on the correct technical view that no return was due, and ends up with a submission that looks inconsistent on its face and leaves one year permanently open to assessment. There is a second failure mode that is worse: assuming the quiet year was also a quiet year for the FBAR. It usually was not, because the FBAR is driven by account balances and has nothing to do with income at all.

How does the US filing threshold actually work?

The US filing test is a gross income test, not a taxable income test, and it is set fresh every year. You compare worldwide gross income for the year against the amount published for your filing status and age. Publication 501 at https://www.irs.gov/publications/p501 defines gross income as all income received in money, goods, property and services that is not exempt from tax, including income from sources outside the United States. For tax year 2025 the Publication 501 chart gives $15,750 for a single filer under 65, $17,750 at 65 or older, $23,625 for head of household under 65, and $31,500 for a married couple filing jointly where both are under 65. Those are 2025 figures only. Every year in your lookback must be tested against that year's own published amounts, which is why a blanket statement such as I was under the threshold for all three years is almost never verifiable without doing the arithmetic year by year.

Four features of that test catch high-earning people who had one atypical year, and they catch them repeatedly.

Married filing separately has effectively no threshold. The Publication 501 chart for 2025 sets the married filing separately gross income threshold at $5, at any age. An American in London married to a British spouse who is not a US person files separately in the overwhelming majority of cases, so the concept of a below-threshold year barely exists for them. This is the single most common misconception we correct.
Self-employment has its own trigger. Publication 54 at https://www.irs.gov/publications/p54 states that if your net earnings from self-employment are $400 or more you must file a return even if your gross income is below the amount listed for your filing status. A founder who drew almost nothing but invoiced a little consulting in the start-up year is usually caught by this and not by the main chart.
Excluded foreign earned income still counts. Publication 54 is explicit that gross income includes any income you can exclude as foreign earned income or as a foreign housing amount. The exclusion is claimed on a return; it does not remove income from the gross income test that decides whether a return is due. Anyone who reasons that the exclusion put them below the threshold has the logic backwards.
Losses do not reduce gross income. Publication 501 states that gross income includes gains, but not losses, reported on Form 8949 or Schedule D, and that business income is not reduced by losses. A year of losses is therefore almost never a below-threshold year for an investor or a business owner. The gross proceeds and gains side of the ledger is what is measured.

Once those four are applied honestly, the population of genuinely below-threshold years shrinks a long way. What is usually left is a year of pure UK-taxed investment income under a single filing status, a year on parental leave with statutory pay and nothing else, a year abroad on an unpaid sabbatical, or a year in which a UK employment ended early and no other income arrived.

Which three years does the streamlined lookback actually cover?

The Streamlined Foreign Offshore Procedures ask for delinquent or amended returns for each of the most recent three years for which the US tax return due date, or properly applied for extended due date, has passed, together with FBARs for each of the most recent six years. The phrasing matters more than filers expect. The period is defined by due dates that have passed, not by the years in which you happened to have income, and not by the years in which you had a filing obligation. There is no language in the IRS instructions that removes a year from the count because no return was required for it. The three years are the three years.

The eligibility test that sits alongside it is a residence test, not an income test. The IRS requires that in one or more of the most recent three years the individual did not have a US abode and was physically outside the United States for at least 330 full days. A year spent in the UK on sabbatical is often the year that most clearly satisfies that test, which is a further reason not to treat it as the year to leave out. Eligibility also rests on non-willfulness, which the IRS defines at https://www.irs.gov/individuals/international-taxpayers/streamlined-filing-compliance-procedures as conduct due to negligence, inadvertence, or mistake, or conduct resulting from a good faith misunderstanding of the requirements of the law.

Does a streamlined filing year below threshold still need a return?

The technically correct answer that no return was legally required is not the same as the right answer for the package. Filing the below-threshold year is a deliberate compliance decision, and there are five distinct reasons behind it.

It starts the assessment period. Section 6501 gives the IRS three years after the return was filed to assess tax, and treats a return filed before the due date as filed on that due date. Section 6501(c)(3) provides that where there is a failure to file a return, tax may be assessed at any time. The statutory text is at https://www.law.cornell.edu/uscode/text/26/6501. The practical consequence is stark: file the quiet year and it closes on a schedule, leave it unfiled and it is the one year in your entire package that stays open indefinitely. Filers who omit it usually believe they are simplifying; they are in fact keeping a year open forever.
It protects a refund or a credit. If UK-source or US-source withholding was applied during the year, or a refundable credit is in point, the money is recovered only through a filed return. The refund window is unforgiving: the IRS states at https://www.irs.gov/taxtopics/tc308 that a refund claim must be made within three years after the date the original return was filed or within two years after the date the tax was paid, whichever is later.
It carries elections and attributes forward. Capital loss carryovers, foreign tax credit carryovers and the continuity of a foreign earned income exclusion election all live on the return. A gap year in the chain forces you to reconstruct positions later from correspondence rather than read them off a filed document, and the reconstruction always lands at the least convenient moment, usually during a later examination or a mortgage or fund subscription that requires filed returns.
It makes the package internally consistent. A submission containing two returns and a bare assertion about the third invites the reviewer to ask what happened in the missing year. A submission containing three returns, one of which shows very little, answers the question before it is asked.
It evidences the narrative. The below-threshold year is frequently the year that explains the whole non-compliance story, because it is the year of the career break, the move, the birth or the failed venture. A filed return with the figures on it is better evidence of that story than a sentence describing it.

There is a symmetrical point worth stating plainly. Filing a return for a year that did not require one does not create a tax liability that was not otherwise there, and a compliant streamlined filer is not exposed to failure-to-file, failure-to-pay, accuracy-related, information return or FBAR penalties on the years in the package. The IRS states that relief directly on the Streamlined Foreign Offshore page. The cost of filing the quiet year is preparation work. The cost of not filing it is an open year.

Does a below-threshold year still need an FBAR?

Yes, in most cases, and this is where the below-threshold year does real damage when it is misread. The FBAR obligation is a value test, not an income test. The IRS explains at https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar that a US person must file where the aggregate value of foreign financial accounts exceeded $10,000 at any time during the calendar year reported and the person had a financial interest in, or signature or other authority over, at least one account located outside the United States.

Read that against the profile of the person actually taking a sabbatical or a parental leave year. They still hold UK current and savings accounts, an ISA, a general investment account and quite possibly a UK company account over which they have signature authority. Their income went to nearly nothing; their balances did not. Aggregate value is tested at the highest point in the year, so a year of drawing down savings can produce a higher FBAR figure than a year of earning. Income falling below the US filing threshold has no bearing on the FBAR at all.

The mechanics are separate too. The IRS confirms that the FBAR is filed electronically through the FinCEN BSA E-Filing System at https://bsaefiling.fincen.gov and is not filed with the federal tax return. It is due 15 April with an automatic extension to 15 October. Where the IRS has not contacted you about a late FBAR and you are not under civil or criminal investigation, late FBARs should be filed as soon as possible with a reason for filing late selected in the e-filing system, or filed inside a streamlined submission where you are eligible. Note that the IRS withdrew its standalone delinquent FBAR submission procedures page in mid-2026, so any guidance still describing that as a named IRS route is out of date; the route now is BSA E-Filing with a stated reason, or streamlined.

What happens to Form 8938 in a year with no return?

Form 8938 behaves in the opposite way to the FBAR, and the asymmetry is the second thing competitors rarely explain. Form 8938 is filed with an income tax return, and the IRS states at https://www.irs.gov/businesses/corporations/do-i-need-to-file-form-8938-statement-of-specified-foreign-financial-assets that if you do not have to file an income tax return for the tax year, you do not need to file Form 8938, even if the value of your specified foreign assets is more than the appropriate reporting threshold. For taxpayers living abroad the thresholds are more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year for an unmarried filer, and more than $400,000 on the last day or more than $600,000 at any time for a married couple filing jointly.

So a genuinely below-threshold year can produce a year with an FBAR obligation and no Form 8938 obligation, on identical assets. Two observations follow. First, that exemption is written by reference to whether you were required to file a return, not by reference to whether you actually filed one, so voluntarily filing the quiet year does not obviously manufacture a Form 8938 obligation. Second, where the assets clearly exceed the thresholds and you are filing the return anyway, we normally include Form 8938 for that year. It costs almost nothing to prepare from the schedules already built for the surrounding years, it removes any later argument about whether the year was complete, and it keeps the asset picture continuous across the three years rather than showing an unexplained hole in the middle.

Can a below-threshold US year still be a UK filing year?

Comfortably, yes, because HMRC tests entirely different things. GOV.UK sets out at https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return that a Self Assessment return is required if you were self-employed as a sole trader and earned more than 1,000 pounds before deducting anything you can claim tax relief on, if you were a partner in a business partnership, if capital gains tax was due on a disposal, or if you had to pay the High Income Child Benefit Charge and do not pay it through PAYE. Untaxed income such as rental income, tips and commission, savings interest, dividends and foreign income can also bring you into Self Assessment.

Three of those triggers fire routinely in exactly the years Americans describe as quiet. A founder in the start-up year crosses the 1,000 pound sole trader line easily. A disposal made to fund a sabbatical is a capital gains event with no relationship to earnings. A partner in a UK partnership files regardless of whether the partnership distributed anything. GOV.UK also confirms at https://www.gov.uk/tax-foreign-income that a UK resident normally pays UK tax on foreign income and usually reports it in a Self Assessment return. And the UK tax year runs 6 April to 5 April against a US calendar year, so a single quiet period straddles two UK years and two US years and can be below the threshold in neither of them cleanly. If you need to file and have not filed before, GOV.UK requires you to tell HMRC by 5 October following the end of the tax year.

How do you document the below-threshold year on Form 14653?

Form 14653 is the certification that carries the whole submission, and the IRS requires the original signed statement plus copies attached to each return and information return submitted. The below-threshold year needs to appear in the narrative rather than be silently absent from it. What works is short, factual and specific.

Name the year and say what changed: the employment that ended, the leave taken, the venture started, the move made. Dates, not adjectives.
State the income position for that year in one sentence and say plainly that a return is being filed for it notwithstanding that gross income did not meet the published filing threshold for that year and filing status.
Explain why the quiet year did not prompt you to look at your US position, if that is the truth. A year of no US income is a very human reason to assume there was nothing to file, and it supports negligence, inadvertence or mistake rather than anything else.
Deal with the FBAR separately in the same year. Say that accounts were held and reported, and do not let the reader infer that a low-income year was treated as a no-reporting year.
Keep the tax and interest schedule aligned. The IRS requires payment of all tax due as reflected on the returns together with all applicable statutory interest on each late payment amount; a year showing no tax due simply shows nothing due, and should not be quietly dropped from the schedule.

What does a return with no tax due actually involve?

Mechanically it is a full return, not a placeholder. It is signed, it carries the same identifying information as the other years, and it is annotated in the same way: the IRS instructs streamlined filers to write Streamlined Foreign Offshore in red at the top of page one of each return and to mail the package to the Austin, Texas address published on the Streamlined Foreign Offshore page. A filer without a Social Security number who is not eligible for one submits an ITIN application with the returns.

Currency translation still has to be done properly even where the result is nil tax. The IRS states at https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates that it has no official exchange rate, that in general you use the spot rate prevailing when you receive, pay or accrue the item, and that any posted rate used consistently is accepted. Consistency across the three years is the thing that matters. Switching to yearly average rates for the quiet year because it is easier, having used spot rates elsewhere, is exactly the kind of internal inconsistency that draws a question.

Elections deserve one deliberate decision each. If the foreign earned income exclusion is being claimed across the package, the quiet year should be handled consciously rather than by omission, because the exclusion is claimed on a filed return and its continuity across years is easier to demonstrate when no year is missing. The same discipline applies to foreign tax credit positions and to any carryover you expect to use in a later year. Publication 54 also confirms the automatic two-month extension to 15 June for taxpayers living abroad, which is part of working out which three years the due dates have actually passed for.

A worked illustration of a below-threshold year

The following is an illustration only, using assumed figures, and is not a client matter. Assume an exchange rate of 1.27 US dollars to the pound as a stated assumption throughout. A US citizen living in London runs a consulting company, files as single, and takes a full calendar year out to launch a new venture. In that year she draws no salary from the new company, receives 9,000 pounds of UK dividends and 1,900 pounds of UK bank interest, and realises no gains. Translated at the assumed rate that is roughly 13,830 US dollars of gross income, below the 2025 single under-65 chart figure of $15,750, so on those facts alone no US return would be required for a year tested against that year's figures.

Now add the rest of her real position. Her UK current account, savings account, general investment account and the new company's account, over which she has signature authority, peaked at an aggregate equivalent of about 480,000 US dollars during the year. That is an FBAR year without argument, and by a wide margin. She also invoiced one former client for 3,000 pounds of consulting work, which on these facts produces net earnings from self-employment well above the $400 self-employment trigger, so a US return is in fact required after all, and the below-threshold analysis fails. On the UK side the same 3,000 pounds crosses the sole trader threshold of 1,000 pounds, so a Self Assessment return is due there too. The year she described as the year I had no income turns out to require a US return, a US self-employment computation, an FBAR and a UK return. That sequence, in that order, is the pattern we see most often.

Where does this go wrong in practice?

Almost always in the same handful of places. Filers test the quiet year against the current year's threshold rather than that year's. They forget that married filing separately leaves essentially no threshold at all. They net losses against gains before applying a gross income test that does not permit it. They treat the foreign earned income exclusion as removing income from the test rather than as something claimed on a return. They assume a quiet income year is a quiet FBAR year. And they leave the year out of the package entirely, in the belief that a year with no obligation is a year with nothing to say, when it is in fact the one year that will remain open to assessment for as long as it stays unfiled.

Our approach on these packages is to reconstruct each of the three years against its own published figures, test the self-employment trigger separately, run the FBAR aggregate independently of income, decide Form 8938 year by year, check the UK Self Assessment position for the two UK tax years that straddle each US year, and then write the narrative so the quiet year is explained rather than absent. It takes more work than skipping the year. It produces a submission that closes three years instead of two.