Do I pay a penalty under the Streamlined Foreign Offshore Procedures?

No. If you qualify and file a complete package, the IRS does not charge failure-to-file, failure-to-pay, accuracy-related, information return or FBAR penalties for the years covered. You pay any US tax due plus statutory interest. The 5% miscellaneous offshore penalty applies only to the Streamlined Domestic Offshore Procedures, which are for people who fail the non-residency test.

Do US business trips count against the 330-day non-residency test?

Yes. The Streamlined test is physical, so every day in the United States counts against you, whatever the reason for the trip. A full day is 24 consecutive hours from midnight to midnight, and time over international waters is not time abroad, so travel days are usually lost too. You need only one qualifying year out of the three return years.

Can I use the Foreign Earned Income Exclusion on a deferred bonus?

Often not. The IRS states that payments received after the end of the tax year following the year the services were performed are not foreign earned income for the exclusion. A deferred award that vests several years after the work therefore cannot be excluded. Traders usually rely on the Foreign Tax Credit for UK tax on these awards instead, matched to the US year in which the income appears.

Is a futures account with a UK broker reportable on the FBAR?

Yes, if the account is held with a non-US financial institution and your foreign accounts together exceed 10,000 dollars at any point in the year. Once the aggregate test is met, every foreign account is reported, including small or closed ones. The account may also count toward Form 8938, which has higher thresholds for taxpayers living abroad and is filed with the tax return.

Does HMRC need to know about my US Streamlined filing?

Streamlined is an IRS procedure, so nothing is filed with HMRC as part of it. The UK figures still matter, because UK income tax is the foreign tax you credit on the US return. If your UK Self Assessment is incomplete, for example missing capital gains or foreign income from a trading account, fix it first so the US credit is not later redetermined and the returns reopened.

Are UK index funds held in a UK tax wrapper a problem on my US return?

Usually yes. A UK tax wrapper has no special status for US purposes, and the funds inside it are generally passive foreign investment companies. Without an election, gains and large distributions fall under the excess distribution rules, with tax at the highest prior-year rates plus an interest charge. Each fund normally needs its own Form 8621 within the Streamlined returns.

Streamlined Foreign Offshore for US Commodity Traders

The IRS Streamlined Foreign Offshore Procedure (SFOP) is the penalty-free route that lets a US citizen living abroad, including a commodity trader on a London desk, catch up on missed US tax returns and FBARs by filing three years of returns, six years of FBARs and a signed certification that the failure was non-willful. If you qualify, the IRS does not charge failure-to-file, failure-to-pay, accuracy-related, information return or FBAR penalties on the years you bring in. You pay any US tax still owed plus statutory interest, and nothing more.

For a trader, eligibility is rarely the hard part. The return is. In the Streamlined packages we prepare for London trading professionals, the errors that cost money come from bonus timing, deferred awards, personal futures accounts and UK funds, not from the procedure itself. This guide covers both layers.

What Is the Streamlined Foreign Offshore Procedure and Who Is It For?

The Streamlined Foreign Offshore Procedures are one half of the IRS Streamlined Filing Compliance Procedures, set out at https://www.irs.gov/individuals/international-taxpayers/us-taxpayers-residing-outside-the-united-states for readers who want the primary text. The procedure is open to US citizens, green card holders and certain others who meet a non-residency requirement and whose failures to file returns, report income, pay tax or file FBARs were non-willful. Non-willful conduct, in the IRS wording, is conduct due to negligence, inadvertence or mistake, or a good faith misunderstanding of the requirements of the law.

It suits the American who moved to London, was paid through UK payroll and assumed PAYE settled everything. It is not available if an IRS civil examination is already open for any of your years, and deliberate concealment belongs in a different, penalty-bearing process.

One point worth stating plainly, because it is repeated wrongly across the internet: there is no 5% penalty under the foreign version. The 5% miscellaneous offshore penalty applies only under the Streamlined Domestic Offshore Procedures, which are for taxpayers who do not meet the non-residency test. A London-based trader who qualifies for the foreign route pays tax and interest only.

Do Your US Business Trips Count Against the 330-Day Test?

Yes, and for traders this is the eligibility question that actually matters. A US citizen meets the Streamlined non-residency requirement if, in any one or more of the three most recent years for which the return due date (including extensions) has passed, they had no US abode and were physically outside the United States for at least 330 full days. Only one qualifying year is needed. The test is physical: a day spent in New York, Houston or Chicago is a day inside the United States, regardless of why you were there, who sent you or which entity paid for the trip.

The IRS defines a full day as 24 consecutive hours beginning and ending at midnight, and its physical presence page at https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion-physical-presence-test confirms that time on or over international waters is not time in a foreign country. A transatlantic travel day is therefore usually not a full day outside the United States. A trader with 30 calendar days on US soil for client visits and desk rotations can lose 40 or more full days once travel is counted. Build the count from travel and expense records, not memory.

Two cautions follow. The Streamlined test is measured within one of the three return years, whereas the Foreign Earned Income Exclusion test can use any rolling 12-month window, so test them separately. And the US abode limb stands apart from the day count: keeping a US dwelling does not necessarily put your abode in the United States, but a trader who keeps a family home there and treats London as a posting needs facts, not assumptions.

What Do You File Under the Streamlined Foreign Offshore Procedures?

The filing package is fixed by the IRS and has to be complete, because a missing or deficient piece means your returns are processed normally, without the protection of the procedure. For a London-based trader, the package normally contains the following:

Delinquent Forms 1040, or amended Forms 1040-X if you filed something before, for the three most recent years whose due date, including extensions, has passed.
Every information return those years require, for example Form 8938 for specified foreign financial assets, Form 8621 for each PFIC and, where relevant, Form 5471 for a foreign company you control.
Delinquent FBARs, FinCEN Form 114, for the six most recent years whose FBAR due date has passed, filed electronically through FinCEN's BSA E-Filing System.
An original signed Form 14653, the certification of non-residency and non-willful conduct, with a copy attached to each tax and information return but not to the FBARs.
Payment of all US tax due plus statutory interest, with your taxpayer identification number on the payment.
The words Streamlined Foreign Offshore written in red at the top of the first page of each return and each information return.

The paper submission goes to the dedicated Austin address listed on the IRS page. For the FBARs, the IRS instructs filers to select Other as the reason for late filing in the BSA E-Filing System and enter Streamlined Filing Compliance Procedures in the explanation box. As an illustration, a submission made in late October 2026, after the extended due dates for 2025 have passed, would generally cover the 2023, 2024 and 2025 returns and the FBARs for 2020 through 2025. Confirm the window on your actual filing date.

A note on late FBARs outside Streamlined. The separate IRS page for Delinquent FBAR Submission Procedures was withdrawn around 1 July 2026, so it should not be treated as a live, named route. Late FBARs are now filed through the BSA E-Filing System with a reason for late filing, or inside the Streamlined package as described above.

How Should a Trader Write the Form 14653 Non-Willful Narrative?

Form 14653 asks you to explain, under penalties of perjury, the specific reasons for your failures. This is where trading professionals face more scrutiny than most expats, and almost no published guide addresses it. A reader of your certification will see a high earner in financial markets, someone who manages risk for a living, and will ask whether the omission was really an innocent mistake. A generic statement that you were unaware of your obligations reads poorly in that context.

A credible narrative is specific and factual. It explains what you believed and why: that your employer operated PAYE and you understood your UK tax to be final; that a UK fund wrapper tax-free in the UK seemed tax-free everywhere; that you did not know a personal futures account with a UK broker was a foreign financial account. It explains how you discovered the problem and what you did next, and contains nothing inconsistent with your emails or employer records. If the honest answer is that you knew about the FBAR and chose not to file, Streamlined is the wrong tool.

Should a Bonus-Heavy Trader Use the FEIE or the Foreign Tax Credit?

For most London traders, the Foreign Tax Credit does more work than the Foreign Earned Income Exclusion, and the reason is arithmetic. The exclusion is capped: the IRS lists a maximum of 120,000 dollars for 2023 on its exclusion page at https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion and later years are indexed for inflation. A trader whose salary and cash bonus run into six or seven figures sees most earnings above the cap, and the remaining income is taxed at the rates that would have applied without the exclusion.

The credit works differently. Under the rules at https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit you claim a credit on Form 1116 for income taxes imposed on you by a foreign country, reducing US tax within the limitation rules, and the IRS notes it is usually to your advantage to credit rather than deduct. Because UK income tax collected through PAYE on high earnings is often at least as heavy as US tax on the same pay, the credit commonly reduces US tax on employment income to nil.

The two do not stack on the same income. The IRS states you cannot claim a credit for taxes on excluded income, and that doing so may be treated as revoking the exclusion. Because the election made in each Streamlined year shapes later years, we model both routes across the whole period before anything is signed.

How Are Deferred Bonuses and Clawbacks Taxed on the US Return?

Many London desks defer part of the bonus into shares, units or cash awards that vest over several years and can be reduced or recovered under malus and clawback provisions. For each award the US return must settle timing, sourcing and relief.

Timing. As a general rule a deferred cash award is taxed on the US return when it is paid, and a share award when it vests or is delivered, not when the bonus was announced. That rarely matches the UK date on which PAYE was operated, so the UK tax on an award must be matched to the US year in which the same income appears, and Form 1116 has to reflect any later redetermination. The IRS notes that a foreign tax redetermination generally requires an amended return and notice to the IRS.

The exclusion trap. The FEIE page states that payments received after the end of the tax year following the year in which the services were performed are not foreign earned income for the exclusion. A deferred award that vests three years after the work cannot be excluded at all, even if every day of that work was performed in London. That is one more reason the credit is usually the primary relief for traders.

Sourcing. A trader who spent part of an earlier year working on a US desk, or on regular US trips, may find that part of a deferred award is US-source income attributable to US workdays. US-source income generally does not support a Foreign Tax Credit for the UK tax on that slice, which can leave a residual US liability. The allocation needs workday records for the years in which the award was earned, not the year it vests.

Clawbacks. If you repay income that was taxed in an earlier year, the US relief normally arises in the year of repayment rather than by reopening the earlier return, and the UK treatment can differ. Where a clawback falls inside the Streamlined window, the two sides must be reconciled carefully, because a mismatch can strand UK tax relief or overstate US income.

Are Personal Futures and Options Section 1256 Contracts?

Some are, and the distinction turns on where they trade. The statute text of 26 USC 1256 at https://www.law.cornell.edu/uscode/text/26/1256 provides that a section 1256 contract includes regulated futures contracts, foreign currency contracts, nonequity options, dealer equity options and dealer securities futures contracts. Open positions are marked to market on the last business day of the year as if sold, and the gain or loss is treated as 60% long-term and 40% short-term capital gain or loss. The contracts are reported on Form 6781.

The trap for a London trader is the definition of a regulated futures contract. It must be traded on, or subject to the rules of, a qualified board or exchange, which the statute defines as an SEC-registered national securities exchange, a domestic board of trade designated as a contract market by the CFTC, or another market the Treasury Secretary determines has adequate rules. A future on a US-designated contract market, even if bought through a UK broker, generally qualifies. A future on a non-US exchange qualifies only if that exchange falls within a Treasury determination; otherwise it follows ordinary realisation rules without the 60/40 split.

Currency positions need separate attention, because the foreign currency contract category covers only contracts traded in the interbank market at arm's length interbank prices. Contracts for difference and UK spread bets are not regulated futures contracts, and their favourable UK treatment does not carry across to the US return. Swaps and similar agreements are expressly excluded from section 1256. Classify each product line before it reaches the return.

Which Trading, Margin and Multi-Currency Accounts Go on the FBAR and Form 8938?

The FBAR test is aggregate. The IRS comparison at https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements explains that you must file when the combined value of your foreign financial accounts exceeds 10,000 dollars at any time during the calendar year, and once that line is crossed, every account is reported, however small. For a London trader that list is usually long:

UK current and savings accounts, including each currency sub-account on a multi-currency platform.
Personal brokerage, futures and options accounts held with UK or other non-US firms, including margin accounts; report the maximum value during the year.
UK tax-advantaged investment wrappers and the funds held inside them, which have no special status on the US return.
Employer share plan accounts held with a non-US administrator, once awards have vested into them.
Accounts over which you have signature authority but no financial interest, which are FBAR-reportable subject to exceptions; whether an exception covers a desk role depends on the employer and is checked case by case.

Form 8938 is a separate obligation filed with the tax return. For taxpayers living abroad, the IRS thresholds are more than 200,000 dollars on the last day of the year or more than 300,000 dollars at any time for single filers, and more than 400,000 or 600,000 dollars for joint filers. A funded brokerage account plus vested awards often exceeds them. The Form 8938 penalty is up to 10,000 dollars for failure to disclose, with more after IRS notice, exactly the kind of information-return penalty Streamlined removes for the years it covers.

Why Are UK Funds a PFIC Problem for US Traders?

Most UK-domiciled collective funds, including the index trackers and money market funds held inside UK tax wrappers, are passive foreign investment companies for US purposes. The Form 8621 instructions at https://www.irs.gov/instructions/i8621 define a PFIC as a foreign corporation where 75% or more of gross income is passive, or at least 50% of its assets produce or are held to produce passive income. A pooled fund meets that test almost by design.

Without an election, a PFIC falls under the section 1291 excess distribution regime: gains on sale, and distributions above 125% of the average of the prior three years, are spread over the holding period, taxed at the highest rate for each prior year and charged interest. The alternatives are a QEF election, which needs annual information from the fund, and a mark-to-market election, available only for marketable stock regularly traded on a qualifying exchange. A small-holding exception from completing Part I applies where aggregate PFIC stock is 25,000 dollars or less, or 50,000 dollars for joint filers, at year end with no excess distribution or disposition gain. Purchase history before the filing window is needed, because the holding period drives the calculation.

How Does the UK Side Affect the US Return?

The UK return does not change whether you qualify for Streamlined, but it changes almost every number in it. UK income tax is the foreign tax that drives the credit, so UK figures must be final and matched to the US calendar year. The UK tax year runs from 6 April to 5 April, so each US year draws on two UK years, and a bonus paid in March sits in a different UK year from one paid in May.

Many traders believe PAYE alone covers them. GOV.UK at https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return lists the situations that require a Self Assessment return, including Capital Gains Tax on disposals, untaxed savings interest and dividends, and foreign income. A trader with a personal trading account or vested share awards sold at a gain usually falls into one of them. If the UK return is incomplete, the foreign tax claimed in the US may later be redetermined, reopening the US return, so we fix the UK position first. UK tax on investment income also sits in a different Form 1116 category from tax on pay.

Worked Scenario: A London Commodity Trader Entering the Streamlined Procedure

Illustration only. The figures below are hypothetical, rounded and assume an exchange rate of 1.25 dollars to the pound for every year; real returns use the applicable IRS-accepted rates for each item.

Dana is a US citizen who moved to London six years ago and trades energy products on a desk. She has filed UK Self Assessment returns every year but has filed no US returns or FBARs since leaving. In late 2026 she decides to come forward. Her facts for the three Streamlined years are as follows:

Base salary of 200,000 pounds a year and a cash bonus of 300,000 pounds in each year, all taxed under PAYE.
A deferred share award from work performed in her first London year vests in year two, worth 150,000 pounds on vesting.
She spent 31 calendar days in the United States in year one, 22 in year two and 18 in year three, mostly on desk visits, plus the travel days.
A personal futures account with a UK broker trading US-listed energy futures and one non-US listed contract, with a peak balance of 180,000 pounds.
UK index funds inside a UK investment wrapper worth 90,000 pounds, bought gradually over five years.
Three UK bank accounts, one with euro and dollar sub-accounts.

Eligibility. Once travel days are counted, year one fails the 330-full-day test, but years two and three pass, so she meets the non-residency requirement. She has no US home, so the abode limb is satisfied. Her Form 14653 narrative explains that she believed PAYE and her UK returns were final, and that she learned of the US obligation when a colleague mentioned FBARs.

Relief. With pay of about 625,000 dollars a year before the deferred award, the exclusion would cover only a fraction, so the package uses the Foreign Tax Credit each year. The few dozen US workdays make a small slice of pay US-source with no UK credit, leaving a modest residual US tax. The vesting award cannot be excluded and is sourced by her US workdays in the year it was earned.

Trading and funds. The US-listed futures are section 1256 contracts reported on Form 6781 with year-end marking; the non-US listed contract is reported under ordinary realisation rules. The UK funds are PFICs, reported on Form 8621 for each fund, and because she never made an election, any sale falls into the excess distribution calculation. Her accounts exceed the FBAR aggregate test in every year, and her year-end assets exceed the Form 8938 threshold for a single filer abroad, so Form 8938 is included each year.

Outcome. Dana files three returns marked Streamlined Foreign Offshore, six FBARs through the BSA E-Filing System, and pays the residual tax with interest. No penalty is charged. Later years move to normal filing, and she plans to sell the PFIC holdings.

What Are the Most Common Mistakes Traders Make Under Streamlined?

Counting calendar days in the US rather than lost full days, and failing the 330-day test in a year assumed to pass.
Excluding a deferred award paid more than a year after the work, which the FEIE rules do not allow.
Treating every personal future as a section 1256 contract, including contracts on non-qualifying exchanges.
Leaving small or closed accounts off the FBAR when the aggregate test brings every account in.
Ignoring UK funds inside tax wrappers, leaving the PFIC exposure open.
Filing US returns before UK figures are final, so the credit is later redetermined and the returns amended.

What Happens After a Streamlined Foreign Offshore Submission?

Streamlined returns are processed like other returns, any balance or refund notice follows if the tax or interest was miscalculated, and the returns remain open to examination like any other. The IRS states that penalties apply on examination only if the original noncompliance is found to be fraudulent or the FBAR violation willful, and that any additional deficiency found can carry additions to tax and penalties on that deficiency. Penalties already assessed for a year are not abated. That is why accuracy on the trading items matters: Streamlined protects honest mistakes, not incorrect returns.

From the next year you file normally, on standard deadlines: Form 1040 with Form 1116, Form 6781 where it applies, Form 8938, Form 8621 for remaining funds, and an FBAR by April or its automatic extension to October, prepared alongside your UK Self Assessment.