Does US tax withheld by my employer mean I do not need to file a US return from the UK?

No. Withholding is a payment towards a liability that is only determined when Form 1040 is filed. A US citizen living in the UK must still file annually, report worldwide income, and separately report UK accounts on an FBAR where the aggregate balance exceeds $10,000 at any time in the year. Filing is also the only way to claim the exclusion or credits that would release over-withheld tax.

Can I use the Streamlined Foreign Offshore Procedures if I am owed a refund?

The procedure is designed for taxpayers who failed to report income from foreign financial assets and pay tax, but returns filed under it can show overpayments. Any refund is governed by the ordinary refund statute. The IRS limits the amount refundable to tax paid within three years before the claim, and withholding is treated as paid on the return due date, so older years expire.

Are wages on a US Form W-2 eligible for the foreign earned income exclusion?

Yes, where the work was physically performed outside the United States and the taxpayer otherwise qualifies. IRS Publication 54 defines foreign earned income by where services are performed, not by who pays or where the money lands. Wages for days worked in the United States are US-source and cannot be excluded, so a workday apportionment is needed. The exclusion is also subject to an annual indexed cap.

Is it too late to elect the foreign earned income exclusion on returns I never filed?

Not necessarily. Under Treasury Regulation 1.911-7(a)(2), a late election is valid if no federal income tax is owed after the exclusion, or, where tax is still owed, if the return is filed before the IRS discovers the failure to elect. The return must state Filed Pursuant to Section 1.911-7(a)(2)(i)(D) at the top of the first page of Form 1040.

Does HMRC expect UK tax on a salary paid by a US company into a US bank account?

Yes, if you are UK resident and perform the duties in the UK. The place of payment does not remove the UK charge, and the US-UK treaty gives the UK the right to tax earnings from employment exercised there. Where the US employer has no UK presence, HMRC guidance describes a direct payment arrangement operated by the employee, or collection through Self Assessment.

Should FICA or UK National Insurance have been paid on my earnings?

Only one should apply. The US-UK Totalization Agreement assigns social security coverage to a single country, and a certificate of coverage is the evidence of which one. A temporary assignment can remain in the US system under a certificate; indefinite UK-based employment generally belongs in the UK system. FICA withheld in error is first corrected through the employer, with Form 843 available if the employer will not adjust.

Streamlined Foreign Offshore: US Employer Paid You in the UK

The IRS Streamlined Foreign Offshore Procedure (SFOP) is the route most senior Americans in the UK use when they stayed on a US employer's payroll, saw federal tax withheld on every pay run, and concluded that nothing further was owed to anyone. Withholding is a payment on account, not a filing. It does not replace Form 1040, it does not report a UK current account on an FBAR, and it says nothing to HMRC. Streamlined Foreign Offshore lets a non-wilful filer put that right with three years of returns, six years of FBARs and a signed certification, with no penalty.

The unusual feature of this fact pattern is that the catch-up frequently produces US refunds rather than US tax, because wages for work physically done in the UK qualify for relief that payroll never applied. The same catch-up also tends to uncover a UK position nobody was managing.

Why does US withholding not settle the US filing obligation?

A US citizen or green card holder is taxed on worldwide income wherever they live, and the obligation to file a return is separate from the obligation to pay. A Form W-2 showing federal income tax withheld proves that money reached the IRS. It leaves every other reporting duty untouched. In the returns we prepare for executives who moved to London and kept their US contract, the same gaps recur: no Form 1040, so no exclusion or credit was ever claimed; no FBAR for UK current, savings, ISA or investment accounts; no Form 8938; and UK interest, dividends and gains never reported to the IRS.

The belief is understandable. IRS Publication 54 at https://www.irs.gov/publications/p54 confirms that US employers must generally withhold US income tax from the pay of US citizens working abroad unless the employer is required by foreign law to withhold foreign income tax.

Who qualifies for the IRS Streamlined Foreign Offshore Procedure (SFOP)?

The IRS sets out the terms at https://www.irs.gov/individuals/international-taxpayers/us-taxpayers-residing-outside-the-united-states and they are specific. The procedure is written for US taxpayers who failed to report the income from a foreign financial asset and pay tax as required by US law, and who may also have failed to file FBARs, where those failures resulted from non-wilful conduct. Two gateway conditions matter most.

The first is non-residency. A US citizen or lawful permanent resident meets it if, in any one or more of the most recent three years for which the return due date has passed, they did not have a US abode and were physically outside the United States for at least 330 full days. The IRS frequently asked questions confirm this test is defined for the procedure itself and is not the section 911 test. For a London-based executive with a US employer this is the first practical hurdle, because trips to head office count against the 330 days.

The second is non-wilfulness, certified under penalties of perjury on Form 14653. A genuine belief that withholding discharged the obligation is a recognisable non-wilful story, but it has to be told with dates and documents, not asserted in one line.

The general Streamlined terms at https://www.irs.gov/individuals/international-taxpayers/streamlined-filing-compliance-procedures also require a valid Social Security number and exclude anyone already under IRS civil examination. The package itself is short to describe.

Delinquent or amended income tax returns for each of the most recent three years for which the due date has passed, with all required information returns attached.
The words Streamlined Foreign Offshore written in red at the top of the first page of each return.
A completed and signed Form 14653 attached to each return in the submission.
Payment of all tax due on those returns, together with statutory interest.
Delinquent FBARs for each of the most recent six years for which the FBAR due date has passed, filed electronically with FinCEN.

A taxpayer who meets the terms is not subject to failure-to-file or failure-to-pay penalties, accuracy-related penalties, information return penalties or FBAR penalties on the submission. The 5% miscellaneous offshore penalty belongs to the Streamlined Domestic Offshore Procedures, for taxpayers who cannot meet the non-residency test.

Does a W-2 earner with unreported UK accounts really fit Streamlined Foreign Offshore?

The published wording is narrower than the way the procedure is often described. The IRS frames eligibility around a failure to report income from a foreign financial asset and pay the tax on it. A salary paid by a US corporation and reported on Form W-2 is not income from a foreign financial asset. What usually brings the W-2 earner inside the wording is the rest of their UK financial life: interest on sterling savings, dividends and gains in a UK brokerage account, income inside an ISA that is tax-free in the UK but taxable in the US, and rental or other receipts paid into UK accounts.

Where a taxpayer has unfiled returns and unfiled FBARs but the UK accounts genuinely produced nothing, the fit with the published purpose is less obvious and the route should be chosen deliberately rather than by habit. The withdrawn Delinquent FBAR Submission Procedures page is no longer a named IRS route, so the practical alternatives are late FBARs filed through the BSA E-Filing System with a reason for late filing alongside late returns filed in the ordinary way. A specialist preparer should make that call on the full facts before anything is filed.

Are W-2 wages for work done in the UK foreign earned income?

Yes. For US tax purposes the source of pay for personal services is the place where the services are performed. Publication 54 defines foreign earned income as income you earn for personal services you perform in a foreign country. The location of the employer, the currency and the receiving bank account do not change the source.

The corollary is just as important. Days worked in the United States, whether at board meetings, client pitches or an annual offsite, generate US-source wages. Those wages cannot be excluded as foreign earned income, and foreign tax credit relief on them works differently. A W-2 gives one total for the year, so the return needs a workday apportionment built from travel records. Bonuses and equity awards generally have to be traced to where the work that earned them was performed.

Can you still claim the foreign earned income exclusion on a late return?

The foreign earned income exclusion is elected on Form 2555, and an election made on a late return is valid only if it falls within Treasury Regulation 1.911-7(a)(2). The regulation, which can be read at https://www.law.cornell.edu/cfr/text/26/1.911-7 for reference, allows the election in four situations: with a timely filed return, with an amended return filed within the refund period that amends a timely return, with an original return filed within one year after the unextended due date, or with a later return where further conditions are met.

That fourth situation is the one a long-term non-filer relies on. If the taxpayer owes no federal income tax after taking the exclusion into account, the election can be made on the late return whether or not the IRS has already discovered the failure to elect. If tax is still owed after the exclusion, the election is good only if the return is filed before the IRS discovers the failure. In both cases the return must carry the statement Filed Pursuant to Section 1.911-7(a)(2)(i)(D) at the top of the first page of Form 1040. On a Streamlined return that sits alongside the red Streamlined Foreign Offshore heading.

For a highly paid executive the second limb is the live risk. The exclusion is capped at an annual indexed amount and compensation above the cap remains taxable, so tax is commonly still due after the exclusion. If the IRS writes first, the late election may be lost for that year.

The alternative is the foreign tax credit on Form 1116 for UK income tax on the same wages. For a UK-resident higher earner the UK charge on employment income usually exceeds the US charge on it, so the credit route can eliminate US tax on UK-workday wages without the cap. The condition is that UK tax has been paid or accrued. Publication 54 is clear that no credit can be taken for foreign tax on income that has been excluded, so the two reliefs cannot be stacked on the same dollars. Which relief suits which year is a computation, not a preference.

How far back will the IRS refund over-withheld tax?

Most guides to the Streamlined procedures assume the delinquent filer owes money. The W-2 earner often does not. If three years of wages were withheld on at US domestic rates and the returns now show that most of those wages are excluded or covered by credits, each return shows an overpayment. Whether it comes back is governed by the refund statute, section 6511, not by the Streamlined terms.

The IRS page at https://www.irs.gov/filing/time-you-can-claim-a-credit-or-refund explains the rule. A claim must generally be made by the later of three years from the date the return was filed or two years from the date the tax was paid. A late original return is itself the claim, so the filing deadline is met. The squeeze comes from the second half of the rule: the amount refundable is limited to tax paid within the three years before the claim, plus any period of extension of time to file. Income tax withheld during a year is treated as paid on the return due date, which for a calendar-year individual falls in mid-April of the following year.

Put those together and every year of withholding has a hard expiry roughly three years after that April date. Withholding for the 2023 tax year is treated as paid in mid-April 2024, so a 2023 return claiming it back needs to be filed by mid-April 2027. Withholding for the 2022 tax year was treated as paid in mid-April 2023, and for a person who never filed and never extended, the window to recover it closed in mid-April 2026. The exceptions the IRS lists are narrow, and none is aimed at an expatriate who simply did not know.

Two consequences follow. The oldest of the three Streamlined years is the one at risk, and a submission prepared at a leisurely pace can forfeit a full year of over-withheld tax. Years before the three-year window are usually beyond recovery already, however large the withholding was, while interest still runs on any year in which tax is owed.

What UK tax should have been paid on those wages?

A US catch-up starts with an honest timeline of where the person lived and worked, and that timeline is exactly what establishes UK tax residence. A UK resident is chargeable to UK income tax on employment earnings, and Article 14 of the US-UK income tax convention gives the country where the employment is exercised the right to tax the remuneration for it. The treaty text at https://www.gov.uk/government/publications/usa-tax-treaties is the reference. For a US citizen the treaty's saving clause preserves the US right to tax as well, with double taxation relieved by credit. In broad terms the UK has the first claim on earnings for UK workdays and the United States gives way through the exclusion or the foreign tax credit. US federal withholding is generally not a credit against the UK charge on UK-workday earnings.

How the UK tax should have been collected depends on the employer's footprint. HMRC's PAYE Manual at https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye81610 explains that an overseas employer falls within PAYE only if it has a tax presence in the UK, such as a branch, agency or representative office. An employee working from home in the UK does not create it. Where there is a UK presence, PAYE should have been operated through it.

Where there is no UK presence at all, HMRC guidance at https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye75040 describes the PAYE direct payment arrangement. It is used where there is assessable employment income, a likely liability, no employer to operate PAYE, and a taxpayer willing and able to operate it on their own income; overseas employers with no UK presence are the first example given. Under the related direct payment scheme the employee accounts to HMRC for both PAYE income tax and employee National Insurance under one reference. Where that is not workable, HMRC deals with the individual through Self Assessment instead.

The executive who assumed US withholding covered everything usually did none of this. No direct payment scheme, no Self Assessment registration, no UK return. That is a UK failure-to-notify position, with tax, interest and behaviour-based penalties, and HMRC can look further back than the three years the IRS asks for. It needs its own disclosure, planned together with the US filing.

Which social security system applies: FICA or UK National Insurance?

Publication 54 states that US social security and Medicare taxes generally do not apply to wages for services performed as an employee outside the United States, with exceptions, one of which is working for an American employer. That is why FICA appears on the W-2 of a US citizen employed by a US corporation while working in London. An employee working in the UK is ordinarily within National Insurance too, so both systems claim the same earnings.

The US-UK Totalization Agreement exists to prevent that double charge by assigning coverage to one country. The IRS summary at https://www.irs.gov/individuals/international-taxpayers/totalization-agreements explains that a certificate of coverage is the document that proves which system applies and supports exemption from the other. Publication 54 adds that where pay in a foreign country is subject only to US social security tax, the employer should obtain the certificate from the Social Security Administration, whose international pages at https://www.ssa.gov/international/ hold the agreement material. Broadly, a worker sent to the UK on a genuinely temporary assignment can stay in the US system under a certificate, while someone living and working in the UK indefinitely belongs in the UK system.

In a catch-up we therefore ask one question early: is there a certificate, and does it still describe the facts? If an assignment that began as temporary became permanent, FICA may have been withheld for years in which UK National Insurance was properly due. The Form 843 instructions at https://www.irs.gov/instructions/i843 provide for a refund claim for social security or Medicare tax withheld in error, but only where the employer will not adjust the overcollection, so the first conversation is with payroll.

How do you stop US withholding and state tax going forward?

Form 673 is the mechanism. The IRS describes it at https://www.irs.gov/forms-pubs/about-form-673 as the statement filed with a US employer to claim exemption from US income tax withholding on wages earned abroad, to the extent of the foreign earned income exclusion and foreign housing exclusion. Form 673 addresses income tax withholding only; it does nothing about FICA, which turns on the certificate of coverage, and an executive relying on the foreign tax credit needs the Form W-4 position revisited as well.

State tax follows its own rules. If the W-2 shows state withholding, the question is whether the person remained a resident or domiciliary of that state after moving, which each state decides under its own tests, and whether a non-resident return can recover tax withheld on wages for work performed entirely outside the state. State refund time limits are separate from the federal one.

What goes on the FBAR and Form 8938 for the UK accounts?

The two reports overlap but are not the same, and the IRS comparison at https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements sets out the difference. The FBAR, FinCEN Form 114, is required where the aggregate value of foreign financial accounts exceeds $10,000 at any time during the calendar year. It is filed electronically through FinCEN's BSA E-Filing System at https://bsaefiling.fincen.gov and is not part of the tax return. Form 8938 is attached to the income tax return and, for a taxpayer living abroad, applies where specified foreign financial assets exceed $200,000 on the last day of the tax year or $300,000 at any time during it for an unmarried filer, or $400,000 and $600,000 for a married couple filing jointly.

For a senior employee in the UK the FBAR list is usually longer than expected: current and savings accounts, cash and stocks and shares ISAs, brokerage and wealth platform accounts, a joint account with a spouse, and any account over which the person has signature authority. The six FBAR years reach back further than the three return years, so request older statements at the outset.

Worked illustration: three years on a US payroll from London

The following is an illustration only. The figures are assumed and are not drawn from any client file. The salary is assumed to be paid in dollars, so no exchange rate assumption is needed.

Assume a US citizen moved from New York to London in January 2021 as a senior executive of a US corporation with no UK branch or office. She remained on the US payroll at a salary of $420,000, with federal income tax, FICA and New York state tax withheld throughout. She filed no US returns after the 2020 tax year, no FBARs, and nothing in the UK. She holds a UK current account, a savings account earning interest and a stocks and shares ISA, with combined balances that exceeded $10,000 in every year and exceeded the Form 8938 thresholds from 2023. She spent about 20 days a year in the United States on business. She instructs a preparer in November 2026.

Returns: the three most recent years with a passed due date are 2023, 2024 and 2025. Each carries a workday apportionment, the UK interest and ISA income, Form 8938, Form 14653 and the red heading.
Non-residency: about 20 US days a year leaves her outside the United States for more than 330 full days in each year, and she had no US abode, so the test is met.
Relief on wages: UK-workday wages are foreign earned income. Her salary exceeds the exclusion cap, so a late Form 2555 election, valid here only because she files before any IRS contact, is compared against the foreign tax credit for UK tax on the same wages.
Refunds: the returns show federal overpayments. The 2023 withholding is treated as paid in mid-April 2024, so the 2023 refund is in time if the return is filed before mid-April 2027. Withholding for 2021 and 2022 is outside the three-year lookback and is not recoverable.
FBARs: she opened her UK accounts on arrival, so FBARs for 2021 to 2025 are filed through the BSA E-Filing System, the 2025 due date having passed.
UK: she has been UK resident since 2021 with no PAYE and no Self Assessment. UK income tax and employee National Insurance are outstanding, and a UK disclosure is prepared in parallel.
Social security: no certificate of coverage exists and the move was indefinite, so the FICA withheld is reviewed with payroll before any Form 843 claim is considered.

The result is counter-intuitive but typical. The United States owes her money for three years and keeps the withholding for the two before that, while the UK is owed more than the US will refund. The order in which the two disclosures are settled changes the US numbers.

In what order should the US and UK catch-up be done?

The failure mode we see most often is a US package filed quickly on the exclusion alone, followed months later by a UK disclosure that would have supported a better US result through credits.

Fix the timeline first: arrival date, UK residence by year, US workdays and the employer's UK footprint.
Identify the refund expiry date for the oldest Streamlined year and work backwards from it. That date, not convenience, sets the filing deadline.
Quantify the UK liability before finalising the US returns, so that the choice between exclusion and credit is made on real numbers.
Make the UK disclosure voluntarily, before HMRC opens an enquiry.
File the Streamlined package complete and in one submission, with both required legends on the returns where the late exclusion election is used.
Correct the future: Form 673 or revised withholding, a settled social security position, and UK payroll or Self Assessment that will run properly from now on.

One caution on timing. Streamlined Foreign Offshore is only available before the IRS opens a civil examination, and the late exclusion election for a taxpayer who still owes tax is only available before the IRS discovers the failure to elect. A person whose W-2s reach the IRS every year with no matching return is not invisible.