IRS Streamlined Filing Specialist: US-Source Income Only

An IRS Streamlined Filing Specialist reads the eligibility test by where the asset sits, not where the income arises. Streamlined relief requires omitted income from a foreign financial asset. A UK-resident American whose omission is purely US-source does not meet that wording and usually belongs in ordinary late filing.

That is the short answer, and it is rarely the end of the matter. Most Americans living in the UK hold at least one UK account, and the wealthier the household, the more foreign items there tend to be. So the real work is establishing whether a genuine foreign-asset omission exists alongside the larger US items. At Jungle Tax we treat that as a question of fact to be evidenced line by line, before anyone signs a certification.

This guide works from the IRS text itself. We say plainly what the IRS states, what it leaves unsaid, and where the conclusion is our reading rather than a published rule.

What does the IRS procedure actually say about foreign financial assets?

Three pieces of IRS wording matter, and they do not use identical language.

• The foreign track eligibility test. The Streamlined Foreign Offshore page requires that the taxpayer have "failed to report the income from a foreign financial asset" and pay tax as required, and adds that the taxpayer may also have failed to file an FBAR, all through non-willful conduct.
• The general purpose statement. The main streamlined page frames the procedures around a failure to report foreign financial assets and pay tax due on those assets. That points to the assets as well as their income.
• The signed certification. Form 14653 has the taxpayer state: "I failed to report income from one or more foreign financial assets." It is signed under penalties of perjury, so the sentence has to be true of the file.

The domestic track uses a slightly different formula again. The Streamlined Domestic Offshore page refers to a failure to report "gross income" from a foreign financial asset, and it requires previously filed returns for the three-year period.

What the IRS does not say

This is where most published explanations stop short, so it is worth being exact. On the IRS pages we reviewed, which were last updated in mid-2026:

• US-source income is not mentioned as a category at all, either as a qualifying item or as a bar.
• No minimum amount of foreign-asset income is stated. The former $1,500 tax threshold was removed when the procedures were modified.
• No proportion test exists. Nothing says foreign-asset income must be the main or a substantial part of the omission.
• Nothing addresses a taxpayer who has an unreported foreign account that produced no income in the period.

Silence is not permission, and it is not prohibition. We would not tell a client that the IRS has blessed any particular ratio, because it has not.

Is the test about income source or asset location?

Asset location. The phrase is income from a foreign financial asset, not foreign-source income. The IRS sends readers to the FBAR instructions and the Form 8938 instructions for the meaning of foreign financial asset, and neither definition turns on the source of the income. That produces results many taxpayers find counter-intuitive. A US share held through a UK custody account produces US-source dividends from a foreign financial account. A UK-listed share held through a US brokerage produces foreign-source dividends from an account that is not a specified foreign financial asset for Form 8938.

The table below is our own classification, built from those definitions and the IRS comparison of Form 8938 and FBAR requirements. The final column is our reading. It is not an IRS list.

Omitted item	Income source	Held in or through	Foreign-asset income on our reading?
Dividends and gains on US shares, Form 1099	Mostly US	US brokerage	No
Dividends on non-US shares	Foreign	US brokerage	Generally no: the account is at a US institution
Dividends on US shares	US	UK custody account	Yes: the account is foreign
Interest on UK deposits	Foreign	UK bank	Yes
Income inside an ISA	Varies	UK provider	Yes: the ISA has no US shelter
Net rent on a US property	US	Direct ownership	No
Net rent on a UK flat	Foreign	Direct ownership	Doubtful: directly held property is not reportable on either form
K-1 income, US partnership	Mostly US	US entity	Generally no
K-1 income, foreign partnership	Varies	Foreign entity	Yes: an interest in a foreign entity is a listed asset type
UK salary	Foreign	Employment	No: earned income, not asset income
UK pension growth	Foreign	UK scheme	Depends on whether anything was currently taxable under the treaty

Two lines deserve particular care. UK salary is foreign income, yet on a literal reading it does not come from a foreign financial asset, so an unreported salary does not by itself supply the required item. UK pension schemes are reported on Form 8938, but where treaty treatment defers the growth there may be no omitted income from them at all. Having a pension is not the same as having omitted income from one.

The definitions can also diverge. An account at a foreign branch of a US institution is reportable on the FBAR and not on Form 8938, according to the IRS comparison, so an account of that kind needs its own analysis.

When does the streamlined route fit a mostly US-source omission?

Where all the IRS conditions are met and there is a genuine foreign-asset omission, we see nothing in the text that carves out the rest of the return. The certification covers the failure to report "all income", and the penalty language protects amounts reported on the returns filed under the procedure. Our reading is that US-source amounts in those same complete returns travel with the submission. That is an inference from the wording, not a published IRS ruling on this fact pattern, and we flag it as such to clients.

The other conditions still apply in full:

• A valid taxpayer identification number, usually a Social Security number.
• No civil examination of any year, whether or not it concerns foreign assets, and no criminal investigation.
• For a US citizen or green card holder on the foreign track, no US abode and at least 330 full days outside the United States in any one of the three most recent years with a passed due date. On a joint return both spouses must qualify.
• Non-willful conduct, certified with a narrative of the facts.
• Three years of delinquent or amended returns, six years of FBARs, and full tax and interest paid with the submission.

On a submission made today, 30 October 2026, those windows would normally be tax years 2023 to 2025 and FBAR years 2020 to 2025, assuming the relevant due dates have passed for that taxpayer.

When are ordinary late returns and FBARs enough?

Where there is no foreign-asset income omission, the literal test is not met and the normal channels are the honest route. That is less alarming than it sounds, because the IRS has ordinary mechanisms for each piece.

The income tax returns

Unfiled years go in as late Forms 1040 and filed years are corrected on Form 1040-X. The failure-to-file penalty is 5% of unpaid tax per month, capped at 25%, and is reduced by the failure-to-pay penalty of 0.5% per month for overlapping months. Reasonable cause can remove these penalties, and the request should be prepared with the same care as a streamlined narrative. Note that the streamlined three-year scope is a term of that procedure. Outside it, there is no equivalent published cap: the assessment period does not begin to run on a return that was never filed, and the IRS commonly looks to six years of delinquent returns under its enforcement policy.

The FBARs

The FBAR duty applies once foreign accounts exceed $10,000 in aggregate at any point in the year, whatever the income. According to the Taxpayer Advocate Service, the IRS will not penalize late FBARs where foreign income was properly reported and tax paid, and where the IRS has not contacted the filer about an audit or delinquent returns for those years. Late FBARs are filed electronically with a stated reason.

That framing suits our subject well. If the UK accounts produced no unreported income, the foreign side may be clean even while the US-source side is not. The IRS's current list of options names three routes and does not expressly address this pairing, so the explanation filed with the FBAR needs to be accurate and consistent with the returns.

Forms 8938, 5471 and similar

Missing information returns with no omitted foreign-asset income follow the delinquent international information return procedures: generally attached to an amended return, with a reasonable cause statement. The IRS warns that penalties may be assessed during processing without considering that statement, so correspondence may follow. For a wealthy filer holding a UK company, the $10,000 Form 5471 penalty alone makes this a live cost. Form 8938 applies to those living abroad above $200,000 at year end or $300,000 at any time, doubled for joint filers.

A route-decision table for the US-source case

Facts on the record	Likely route	US penalty position	What to watch
US-source omissions only. No UK accounts above FBAR limits. No foreign assets.	Ordinary late or amended returns	Failure-to-file and failure-to-pay, subject to reasonable cause	Streamlined wording not met
US-source omissions. UK accounts exist and all their income was reported. FBARs late.	Form 1040-X plus late FBARs	Accuracy penalty possible on returns. FBAR relief on the stated conditions	Check that "reported" is true of every UK account in every year
US-source omissions. UK accounts paid interest that was also omitted. Non-resident test met.	Streamlined Foreign Offshore	None stated if all terms are met	Narrative must explain the US items too
US-source omissions. Foreign accounts unreported but genuinely income-free.	Grey area: ordinary route unless a real item is found	As ordinary route	Purpose wording and certification wording pull apart. Do not sign a sentence that is not true
Foreign-asset income omitted. Returned to the US and non-resident test failed. Returns previously filed.	Streamlined Domestic Offshore	5% offshore penalty on the foreign asset base	Base is foreign assets, so US holdings stay outside it
Civil examination open, or the facts suggest willfulness.	Not streamlined	Case-specific	Take legal counsel's view on the Criminal Investigation voluntary disclosure practice

A worked example with illustrative figures

A US citizen has lived in London since 2017, and has filed nothing with the IRS since moving. Each year there is roughly $430,000 of dividends and gains in a US brokerage account reported on Forms 1099, $58,000 of net US rent, $190,000 of K-1 income from a US partnership, and UK salary covered by PAYE. After credit for UK tax, and with the 3.8% Net Investment Income Tax on top, the assumed additional US tax is $96,000 for 2023, $104,000 for 2024 and $112,000 for 2025. All figures here are invented for illustration.

Version A. UK savings accounts paid around $2,400 of interest a year, also unreported. That is about 0.35% of the omitted investment income, yet it is an actual item of income from a foreign financial asset. If the other conditions hold, the foreign track looks available. The bill is $312,000 of tax plus statutory interest, with no failure-to-file, failure-to-pay, accuracy, information return or FBAR penalty under the procedure's stated terms.

Version B. The UK accounts are non-interest current accounts, and nothing else foreign produced income. The certification sentence cannot honestly be given. Late returns filed and paid on 15 November 2026, counting from the automatic 15 June date for those abroad, carry the following before interest and before any reasonable cause request:

Tax year	Assumed tax	Failure to file (22.5% net)	Failure to pay (months at 0.5%)	Total penalties
2023	$96,000	$21,600	$13,920 (29)	$35,520
2024	$104,000	$23,400	$8,840 (17)	$32,240
2025	$112,000	$25,200	$2,800 (5)	$28,000
Total	$312,000	$70,200	$25,560	$95,760

So about $96,000 can turn on whether a few thousand dollars of UK interest exists. That gap is a reason to examine the facts rigorously. It is not a reason to find an item that is not there. Version B also has earlier open years to consider, which sit outside this table, and a stronger reasonable cause case may reduce the figure.

What does the record need to show?

The IRS FAQ on the narrative statement asks for specific reasons, including favourable and unfavourable facts, and for an explanation of the source of funds in foreign accounts and the taxpayer's contact with them. For this fact pattern, we would expect the file to hold:

• An asset map for every year. Each account and holding, its institution and country, and whether it meets either IRS definition, tested against FBAR and Form 8938 separately.
• A foreign-income schedule built from statements. Annual statements or interest certificates showing the amount and year of each foreign-asset item, kept with a note of whether it was previously reported.
• A US-source reconciliation. Forms 1099 and K-1 tied to IRS wage and income transcripts, so that the filed returns agree with what the IRS already holds.
• A narrative that explains the US items. This is the hard part. The certification covers all income, not just foreign income. A statement about not understanding UK account reporting says nothing about why a US Form 1099 or K-1 went unreported. If those forms were arriving at a known address, the narrative has to address it directly. A belief that UK PAYE settled the position may explain salary, but it does not obviously explain US dividends.
• A contact check. Any IRS notice for any year should be reviewed before a route is chosen. The published bar refers to a civil examination, and the character of a particular letter is a matter to establish rather than assume.
• A record of the route decision. A dated note stating why the wording was or was not met, which supports consistency if questions come later.

How does this play on the UK side?

The distinction that drives the IRS analysis is of little use to HMRC. For a UK resident, a US brokerage account, US rent and a US partnership share are themselves offshore items. An American who is clean on the UK side for salary may still have a substantial UK omission on exactly the income the IRS calls US-source. Our UK tax team treats both filings as one exercise for that reason.

Issue	United States (IRS)	United Kingdom (HMRC)
Character of US dividends, rent, K-1	Domestic, not foreign-asset income	Foreign income for a UK resident
Disclosure route	Late returns or streamlined, depending on the record	Worldwide Disclosure Facility for offshore matters
Timetable	No fixed submission window once started	90 days from HMRC's acknowledgement of notification
Look-back	Three years and six FBAR years under streamlined	Up to 12 years for offshore matters, 20 if deliberate or on failure to notify
Penalty ceiling	25% each on filing and payment, ordinary route	Up to 200% of offshore liability, depending on territory and behaviour
Tax year	Calendar year	6 April to 5 April

Four UK points are specific to the wealthy American reader:

• Former remittance basis years. Before 6 April 2025 some of this income may have been outside UK tax unless remitted, provided a valid claim was made. That needs evidence year by year rather than assumption.
• The four-year regime. The foreign income and gains regime offers relief for qualifying new residents after ten years of non-residence, claimed through Self Assessment. A claim gives no US relief, and it costs the personal and capital gains allowances.
• Credit limits under the treaty. Article 24 of the US-UK treaty has special rules for US citizens resident in the UK. For US-source income the UK generally takes into account only the US tax a non-citizen UK resident would bear, and the US side provides its own credit mechanics. US dividends therefore do not simply net off.
• The surtax nobody credits. Treasury regulations do not allow the foreign tax credit against the Net Investment Income Tax, which applies above $200,000 for a single filer and $250,000 on a joint return. For this income profile, that often leaves real US tax even where UK tax is higher.

Sequencing matters too. HMRC's penalty position depends on behaviour and on whether the disclosure is prompted, and the US and UK figures must reconcile, because the credit on each side depends on the other. Both filings should come from the same set of workpapers.

Common errors we correct

• Assuming "foreign income" and "foreign-asset income" mean the same thing. UK salary shows the difference.
• Assuming a US brokerage account disqualifies the taxpayer. It does not. It is simply not the qualifying item.
• Treating any UK account as enough. The foreign track requires omitted income from the asset, and the certification says so.
• Leaving US items off a streamlined return. The returns must be complete, and the certification reaches all income.
• Using the red-ink marking and Form 14653 on an ordinary late return. These belong to a submission that genuinely fits, and the instructions need to be followed exactly.
• Fixing the IRS and forgetting HMRC. Our US-UK practice rarely sees one side affected in isolation.

For related reading, the FBAR penalty calculator frames the foreign account exposure, and our high-net-worth practice handles multi-entity catch-up files of this kind. Further analysis sits in our guides library.

Bringing the file together

The useful question is not whether most of the missed income is American. It is whether a real item of income from a foreign financial asset was omitted, by conduct that can honestly be certified as non-willful, on a record that also accounts for every US form. If yes, the streamlined terms are likely to be available and the US items go in the same returns. If no, ordinary filing is the correct route, and a well-built reasonable cause case does the work instead.

If you are a US citizen or green card holder in the UK with late or incomplete filings, contact our cross-border team for a confidential consultation. We will map your assets against the IRS definitions, tell you which route the record supports, and prepare the US and UK filings as one piece of work.