Can I use the Streamlined Foreign Offshore Procedure if I only missed Form 8865?

If every item of income from the co-investment plan was already reported and taxed, and only the Form 8865 is missing, the streamlined procedure may not be the natural fit. IRS.gov points taxpayers in that position to the Delinquent International Information Return Submission Procedures, which involve filing the missing form with a reasonable cause statement, usually attached to an amended return. The streamlined route is designed for cases with unreported income or unpaid tax. Many co-investment cases involve both missing forms and missing distributive share income, which is why streamlined is common.

Is my employee co-investment plan reportable on the FBAR?

It depends on the facts. FinCEN treats a mutual fund or similar pooled fund, meaning one with shares available to the general public, regular net asset value determination and regular redemptions, as a reportable account. In 2011 FinCEN indicated that private equity and hedge fund interests not available to the public were not being brought within the rules at that time. A closed employee feeder often falls outside that definition, but a linked cash or custody account in your name, or UK bank accounts used for capital calls, may still be reportable. Document the reasoning for each year.

Is there any penalty under the Streamlined Foreign Offshore Procedure?

No penalty applies for taxpayers who meet all the requirements. IRS.gov states that eligible taxpayers will not be subject to failure-to-file and failure-to-pay penalties, accuracy-related penalties, information return penalties or FBAR penalties. You must still pay all tax due on the three years of returns plus statutory interest. The 5 percent miscellaneous offshore penalty applies only under the Streamlined Domestic Offshore Procedure, for taxpayers who cannot meet the non-residency test. A banker who moved back to the United States recently should check the 330-day test carefully before choosing a route.

My employer's payroll handled UK tax on the plan. Does that cover my US reporting?

No. UK payroll and the employer's HMRC employment-related securities return deal only with UK tax. As a US citizen you are taxed on worldwide income and must report partnership allocations, PFIC income, foreign financial assets and accounts on your US returns and FBARs separately. The UK tax already paid is not wasted, since it can usually be claimed as a foreign tax credit on Form 1116, but only if the income is reported in the US. Relying on payroll is a common reason for non-willful failures and can form part of a Form 14653 narrative.

How do I know if my co-investment feeder is a PFIC?

Start with classification. If the feeder is a partnership for US tax purposes, it is not itself a PFIC, although corporate entities beneath it may be. If it is a foreign corporation, it is a PFIC if 75% or more of its gross income is passive or at least 50% of its assets produce passive income, and a vehicle holding fund interests will usually meet one of these tests. Ask the plan administrator whether any Form 8832 election has been filed and whether the fund issues PFIC annual information statements that would support a qualified electing fund election.

Do capital calls affect my Form 8865 obligations?

They can. A small employee stake rarely reaches the 10% or 50% ownership levels behind Form 8865 Categories 1, 2 and 4. Category 3, however, applies to a US person who contributes property to a foreign partnership and either holds at least 10% afterwards or contributes more than $100,000 within a 12-month period, including contributions by related persons. Large drawdowns, particularly in plans leveraged with employer loans, can cross that figure. The Form 8865 instructions set a penalty of 10% of the value contributed, capped at $100,000 unless the failure reflected intentional disregard.

Streamlined Foreign Offshore for UK Banker Co-Investment

The Streamlined Foreign Offshore Procedure is usually the right way for a US-citizen investment banker or private-equity professional living in London to bring an unreported employee co-investment plan into US compliance, provided the failure was non-willful and the non-residency test is met. The first step is working out what the co-investment vehicle is for US tax purposes, because that answer decides whether you report a distributive share of partnership income, apply the passive foreign investment company rules, or both, and which information returns belong in the package.

A co-investment plan is an arrangement under which employees invest their own money, often alongside a deferred bonus or a firm loan, into a feeder vehicle that invests next to the firm's funds. The paperwork is written for UK payroll and HMRC reporting, not for a US citizen's Form 1040, which is why these interests often go unreported for years.

What is the Streamlined Foreign Offshore Procedure and does a co-investment plan fit it?

The Streamlined Foreign Offshore Procedure is an IRS programme for individual US taxpayers living outside the United States whose failure to report income from foreign financial assets, pay tax, or file information returns and FBARs resulted from non-willful conduct. IRS.gov sets out the package: delinquent or amended returns for the most recent three tax years for which the due date has passed, delinquent FBARs for the most recent six years for which the FBAR due date has passed, payment of all tax due plus statutory interest, and a signed Form 14653 certification. Each return is marked Streamlined Foreign Offshore at the top of the first page.

A co-investment plan fits when it produced income that should have been on your US returns, such as partnership allocations, dividends or realised gains, and the related information returns were also missed. IRS.gov says required information returns go in with the streamlined returns, citing Forms 3520, 5471 and 8938 as examples. For a co-investment interest that typically extends to Form 8865 or Form 8621, depending on classification.

The penalty position is the attraction. Qualifying taxpayers are not subject to failure-to-file, failure-to-pay, accuracy-related, information return or FBAR penalties. Under the Streamlined Domestic Offshore Procedure, IRS.gov describes a miscellaneous offshore penalty of 5 percent of the highest aggregate balance or value of the relevant foreign financial assets. Under the foreign procedure that penalty does not apply.

Who qualifies for the Streamlined Foreign Offshore Procedure as a US banker in London?

Each of these conditions needs checking before any return is prepared:

Non-residency: for a US citizen or green card holder, IRS.gov requires that in at least one of the most recent three years you had no US abode and were physically outside the United States for at least 330 full days. Bankers who travel often to New York should count days carefully.
Non-willful conduct: the failure must come from negligence, inadvertence, mistake or a good-faith misunderstanding of the law, certified under penalties of perjury on Form 14653.
No existing IRS contact: the procedure is closed to anyone already under civil examination or criminal investigation.
A valid SSN, or an ITIN for those not eligible for one.
Unreported income or tax to correct, not only missing forms.

That last point matters because many plans produce little taxable income while the fund is still investing. If your only failure is a missing Form 8865 or Form 5471 and all income was reported, IRS.gov points to the Delinquent International Information Return Submission Procedures, a page the IRS last reviewed in April 2026. You file the missing forms, usually with an amended return, and attach a reasonable cause statement; IRS.gov warns penalties may still be assessed initially without that statement being considered. Separately, the IRS removed its Delinquent FBAR Submission Procedures page in mid-2026, so that route should not be relied on for a missed FBAR.

Is my co-investment vehicle a partnership or a corporation for US tax purposes?

The legal label in the offering documents does not settle US classification. Under the Treasury entity classification regulations, which the IRS applies through Form 8832, a foreign eligible entity with no election takes a default classification based on member liability. It is a partnership if it has two or more members and at least one does not have limited liability, and an association taxable as a corporation if all members have limited liability. A single owner without limited liability is disregarded.

An English or offshore limited partnership normally has an unlimited-liability general partner, so it will usually default to partnership treatment. A non-US company whose shareholders all have limited liability will usually default to corporate treatment unless a check-the-box election on Form 8832 has been filed, and some foreign entity types are per se corporations that cannot elect. Ask the plan administrator whether an election has been filed for the feeder and every entity beneath it.

How is a co-investment partnership reported on a US return?

If the vehicle is a partnership, you are taxed each year on your distributive share of its income, gain, loss and deduction, whether or not anything is distributed. A plan may pay nothing for five years while the US expects annual reporting of allocated gains, interest and dividends. Character flows through, so long-term gain realised by the fund stays long-term gain on your return.

Form 8865 is the information return for US persons with interests in foreign partnerships. Its instructions on IRS.gov describe four filer categories:

Category 1: a US person who controls the partnership, meaning more than a 50% interest.
Category 2: a US person owning a 10% or greater interest while the partnership is controlled by US persons each owning at least 10%.
Category 3: a US person who contributes property for an interest and either owns at least 10% immediately afterwards or contributes more than $100,000 within a 12-month period, including contributions by related persons.
Category 4: a US person with a reportable acquisition, disposition or change in proportional interest involving at least a 10% interest.

An individual employee stake in a large feeder rarely approaches 10%, so Categories 1, 2 and 4 are usually not triggered. Category 3 is the one to watch: capital calls are cash contributions, and a senior banker funding large drawdowns can cross the $100,000 threshold without a meaningful percentage. The instructions set a Category 3 penalty of 10% of the fair market value contributed, capped at $100,000 unless the failure was due to intentional disregard. Qualifying streamlined filers are relieved of these information return penalties.

What if the co-investment vehicle is a foreign corporation or holds one?

A passive foreign investment company, or PFIC, is a foreign corporation where 75% or more of gross income is passive or at least 50% of its assets produce passive income, according to the Form 8621 instructions on IRS.gov. A feeder company holding fund interests will almost always meet one test. PFIC status can also arise indirectly, where a partnership feeder invests through corporate blockers.

Form 8621 is filed for each PFIC. The instructions contain limited exceptions, including where aggregate PFIC stock is worth $25,000 or less, or $50,000 on a joint return, at year end with no excess distribution or gain, and a $5,000 exception for certain indirect holdings. Senior co-investment balances usually exceed these. The default regime taxes excess distributions and gains at the highest rate with an interest charge, so ask early whether the fund issues the annual information statement needed for a qualified electing fund election. Retroactive elections are restricted and turn on the facts.

Form 5471 applies only at specified ownership levels in a foreign corporation. For a small slice of a widely held feeder company those thresholds are very unlikely to be met, but the analysis should still be recorded.

Do carried-interest style allocations change the US treatment?

Some plans add a performance allocation to the employee's invested capital. Section 1061 imposes a three-year holding period before gains allocated on a partnership interest held in connection with services qualify as long-term capital gain, and the 2025 US legislation left that rule in place. Returns on capital actually invested are generally analysed separately, but that depends on how the partnership agreement allocates profits, so the documents must be read line by line.

Does an FBAR apply to a co-investment interest?

FBAR treatment of fund interests is unsettled, and the answer depends on the facts. FinCEN's regulations treat a mutual fund or similar pooled fund as a reportable account, defining it as a fund issuing shares available to the general public with a regular net asset value determination and regular redemptions. When FinCEN finalised the rules in 2011, it indicated that private equity and hedge fund interests were not being brought within the requirement while not available to the general public, leaving the question for future guidance. A closed employee feeder will often fall outside the definition, but related items can still create reporting:

A cash or custody account in your name at a non-US institution used for distributions or capital calls.
UK bank accounts funding the plan, reportable once aggregate foreign accounts exceed $10,000 at any time in the year.
An indirect financial interest in accounts held by a partnership in which you own more than 50% of profits or capital, a level employee stakes rarely reach.
Signature authority over plan or employer accounts held in a work capacity, which has its own rules.

Where the answer is uncertain, write down the reasoning and apply it consistently across all six FBAR years.

Is a co-investment interest reportable on Form 8938?

Usually, yes. The Form 8938 instructions list an interest in a foreign partnership or foreign entity not held in a financial account as a specified foreign financial asset. For a taxpayer meeting the presence-abroad test, the threshold is more than $200,000 at year end or $300,000 at any time for an unmarried filer, and more than $400,000 or $600,000 for a joint return. An asset reported on Form 8865, 5471 or 8621 need not be listed again, but those forms must be identified in Part IV. Small stakes outside every Form 8865 category usually belong on Form 8938 itself.

What data should you request from your employer or plan administrator?

Most guidance stops at naming the forms, but the real bottleneck is data. UK plan statements show capital balances prepared to UK standards, while a US return needs year-by-year figures by character. A written request to the administrator should cover:

Each vehicle's legal form, jurisdiction and any Form 8832 election, with effective dates.
For partnerships, annual allocations of ordinary income, interest, dividends, short-term and long-term gain and foreign taxes, ideally as a K-1 style statement or Schedules K-2 and K-3 equivalents.
For corporate vehicles or blockers, PFIC annual information statements and year-end values.
Capital call and distribution ledgers, needed for Category 3 testing, basis and Form 8938 maximum values.
Loan statements for employer financing, including interest, repayments and any waiver.
The UK tax treatment applied through payroll or reported to HMRC.

Employee feeders often do not produce US tax packages, but the data usually exists in the fund accounting system. Allow several weeks, and document any estimation method used where a figure cannot be obtained.

How do capital calls and employer leverage complicate the catch-up?

Many plans are commitments drawn down over years, sometimes part-funded by a limited-recourse employer loan secured on the plan interest. Capital calls build basis and may trigger Form 8865 Category 3. Interest on a loan used to buy an investment may be deductible as investment interest, subject to limits. A below-market or waived loan may produce compensation income that the US must recognise alongside the UK payroll treatment. A sterling loan repaid after exchange rates move can create a separate currency gain or loss.

How does UK tax on the plan interact with the US filing?

HMRC treats co-investment and carried interest awarded to UK employees of fund managers as employment-related securities, and the employer files an annual ERS return by 6 July after the tax year. The UK carried interest rules were reformed from 6 April 2026, moving carry into the income tax framework, so later allocations may be taxed differently from earlier years. Gains on the employee's own invested capital generally follow ordinary UK investment rules.

On the US side, UK tax on the same income is claimed as a foreign tax credit on Form 1116, because the savings clause in the US-UK tax treaty lets the US tax its citizens largely as if the treaty did not apply. The difficulty is timing: the US may tax a partnership allocation when earned inside the fund, while HMRC may tax it only when proceeds are distributed. Each streamlined year should reconcile UK tax paid to the US income it relates to, using carryback and carryforward where permitted.

Worked scenario: a London-based US banker with an unreported co-investment interest

Consider a hypothetical US citizen managing director who has lived in London since 2018 and spends well over 330 full days a year outside the United States. Each year she committed part of her deferred bonus to her employer's co-investment plan, an English limited partnership feeding several buyout funds, with part funded by an employer loan. She filed US returns from her UK payslips and assumed payroll dealt with the plan, never filing Forms 8865, 8621 or 8938.

The method runs in order. The administrator confirms the feeder has an unlimited-liability general partner and no election, so it is a partnership by default, and that two investments sit in corporate blockers, raising indirect PFIC questions. The capital call ledger shows calls above $100,000 in one 12-month period, requiring a Category 3 Form 8865. Each of the three years is amended on Form 1040-X with her distributive share by character, a section 1061 check on any performance allocation, and Form 8621 where no exception applies. UK tax on the same items is claimed on Form 1116. Form 8938 is prepared for years above the presence-abroad thresholds, six years of FBARs cover her UK accounts and any plan cash account with a note on the partnership interest itself, and she signs Form 14653.

Her non-willful narrative is specific: she reported all salary and bonus, believed payroll and the plan's UK reporting covered her obligations, received no cash until a 2025 realisation, and acted as soon as a colleague mentioned US reporting of co-investment interests. The actual tax depends on her allocations, their character and the UK tax available as a credit.

Why a Streamlined Foreign Offshore filing for co-investment plans needs specialist preparation

A Streamlined Foreign Offshore submission is a certified, one-time correction whose strength depends on consistency across returns, information forms, FBARs and the Form 14653 narrative. Our comprehensive US and UK tax preparation and compliance service handles the full package for bankers, investors and business owners in London, from the administrator data request to final filing.