US UK Accountants Second Opinion on Your Filed US Returns

A US UK accountants second opinion is an independent, line-by-line review of US returns already filed for you, usually by a UK-only or generalist preparer. It tests foreign account reporting, PFIC treatment of UK funds and ISAs, the foreign tax credit, currency method and treaty positions, then tells you whether to leave the returns alone, amend, or use a formal IRS procedure.

Most of the Americans in Britain who come to Jungle Tax for this review are not in trouble. They have filed every year, paid what they were told to pay, and kept copies. What has changed is the stakes: a company sale is approaching, a US mortgage underwriter wants three years of transcripts, a move back to New York is planned, or a new wealth manager has looked at the 1040 and asked who prepared the PFIC schedules. When the answer is "there aren't any", a second opinion stops being optional.

This guide sets out exactly what a specialist review examines, how to read the findings, and how to choose between doing nothing, a simple amendment, the delinquent information return route, and the Streamlined Foreign Offshore Procedure. It is written for readers who did file. If your UK accountant told you that no US return was needed at all, your starting point is different, and our IRS streamlined filing team covers that situation.

Why do US returns prepared by a UK accountant need a second opinion?

A capable UK chartered accountant can prepare an excellent Self Assessment return and still produce a weak Form 1040. The two systems ask different questions about the same money. HMRC asks what is taxable in the UK and when; the IRS taxes a US citizen on worldwide income, recognises none of the UK's tax wrappers, measures everything in dollars, and attaches a set of information returns whose penalties are unrelated to the tax due.

The typical failure is therefore not arithmetic. It is mapping. A UK-trained preparer naturally treats an ISA as invisible, a UK unit trust as a normal fund, a P60 figure as the full measure of employment income, and a sterling gain as the gain. Each of those assumptions is reasonable in the UK and wrong, or incomplete, on a US return.

There is also a structural reason to review now rather than later. The usual three-year assessment window does not start running on an item tied to a missing information return such as Form 8938, Form 5471 or Form 8621. A return that looks closed may be open indefinitely for anything connected with the missing form, and an omission of more than $5,000 of income from specified foreign financial assets brings a six-year statute. Older years that you assumed were finished can still be in play.

What a specialist US-UK review actually examines

A proper review is not a re-key of your figures into different software. It starts with source documents from both countries and rebuilds the US picture independently, then compares it with what was filed. These are the areas where we most often find a gap.

Schedule B, Part III and FBAR consistency

Line 7a of Schedule B asks whether you had a financial interest in, or signature authority over, a foreign financial account. For an American living in London the answer is almost always yes. We regularly see returns where the box is ticked "No" while an FBAR (FinCEN Form 114) was filed separately, or the reverse: the box ticked "Yes" with no FBAR on record. Either inconsistency is a signal to an examiner. The review reconciles every account across the year: current accounts, savings, ISAs, the general investment account, workplace and personal pensions, joint accounts with a non-US spouse, and any company bank account over which you hold signature authority. The FBAR threshold is an aggregate maximum value above $10,000 at any point in the year, so a single bonus month can trigger it.

Form 8938 (FATCA) and the overseas thresholds

Form 8938 is filed with the 1040, not separately, and it overlaps with the FBAR without replacing it. For a taxpayer living abroad, the reporting thresholds are $200,000 at year end or $300,000 at any time for a single filer, and $400,000 or $600,000 for joint filers. Wealthy clients usually exceed these, yet Form 8938 is one of the forms most often missing from UK-prepared returns. The penalty for failing to file is $10,000, with further penalties after IRS notice, and, as noted above, the omission keeps the statute open. See the IRS page About Form 8938 for the current instructions.

PFIC treatment of UK funds and ISAs (Form 8621)

This is the single largest source of error in the returns we review. Most UK-domiciled collective investments, including OEICs, unit trusts, investment trusts and many UK-listed ETFs, are passive foreign investment companies for US purposes. Holding them inside an ISA changes nothing for the IRS: the wrapper is not recognised, so income and gains inside it are reportable, and the funds within it are PFICs.

Under the default "excess distribution" regime, a gain on disposal is spread back over the holding period, the portion allocated to earlier years is taxed at the highest ordinary rate for each of those years, and an interest charge is added. Elective regimes (qualified electing fund or mark-to-market) can be more benign but must be made on time and need information many UK funds do not provide. The review checks whether each fund was identified, whether a Form 8621 was filed for each where required, which regime applies, and whether distributions were wrongly reported as qualified dividends. See About Form 8621.

Foreign tax credit versus foreign earned income exclusion

Generalist preparers default to the foreign earned income exclusion (FEIE) on Form 2555 because it is simple. For a high earner in the UK it is often the wrong tool. UK income tax at 40% and 45% usually exceeds the US liability on the same salary, so the foreign tax credit on Form 1116 alone may eliminate US tax on earnings and build carryforwards. Claiming the FEIE disallows credit for the UK tax attributable to the excluded slice and can push other income into higher brackets because of the stacking rule. The choice is also sticky: revoking the FEIE generally bars a new election for five years without IRS consent. A review models both approaches for every open year before recommending any change, because switching mid-history has knock-on effects.

Form 1116 categorisation and the UK tax year

Even where the credit is used, we often find a single Form 1116 covering everything. Credits must be computed separately by category: general category income (salary, bonus, benefits) and passive category income (interest, dividends, most gains) at minimum, with treaty re-sourced income on its own form where relevant. Excess general-category credit cannot shelter passive income, which is why ISA dividends with no UK tax can produce a US bill even for someone paying heavy UK tax.

Timing is the second problem. The UK tax year runs from 6 April to 5 April; the US year is the calendar year. UK tax must be matched to the US year in which the income is reported, and the review checks whether the preparer simply took the UK liability for the tax year ending in that calendar year, which mismatches both income and credit.

Mapping UK income into US categories

• P60 and payslips: the P60 shows taxable pay after salary-sacrifice pension contributions. US gross income may differ, and a December payslip is needed to cut the UK year at 31 December.
• P11D benefits: private medical cover, a company car and other benefits in kind are generally taxable in the US too and are frequently omitted.
• Share awards: RSU vesting and option exercise must be sourced between UK and US workdays where you were internationally mobile, and the US basis follows the US income recognised, not the UK figure.
• Dividends: dividends from UK companies can be qualified dividends under the treaty, but PFIC distributions cannot, and the two are often lumped together.
• Capital gains: the US gain uses the dollar cost at the purchase-date exchange rate and dollar proceeds at the sale-date rate. A sterling loss can be a dollar gain. UK reliefs, the annual exempt amount, and private residence relief rules have no direct US equivalent, and the US main-home exclusion has its own tests and limits.
• Pensions: employer contributions, growth inside a UK registered scheme, and any lump sum all need a stated treaty position, not silence.

Currency conversion method

The IRS accepts a yearly average rate for income that accrues evenly, such as salary, but specific transactions (a share sale, a property purchase, a large dividend) generally require the rate on the transaction date. A frequent shortcut is to convert the whole UK return at one average rate. The review checks the method year by year and confirms it was applied consistently. It also looks for foreign currency gains that preparers rarely spot, such as the gain that can arise when a sterling mortgage is repaid after the pound has weakened against the dollar.

Form 5471 for a UK company

If you own 10% or more of a UK limited company, whether a trading business, a consultancy or a holding vehicle, a Form 5471 is usually required, and the company is likely to be a controlled foreign corporation. That brings Subpart F and the tested-income regime (formerly GILTI, revised from 2026) into play, possibly with a section 962 election to access corporate-rate treatment and credit for UK corporation tax. The base penalty for a missing 5471 is $10,000 per form per year. UK accountants who prepare the company's statutory accounts often do not realise the shareholder's US return needs this form at all.

Treaty positions and Form 8833

Where a return relies on the US-UK income tax treaty to override the Internal Revenue Code, for example in treating UK pension contributions or growth as non-taxable, re-sourcing income, or applying a tie-breaker, disclosure on Form 8833 is often required. The penalty for an undisclosed treaty-based position is $1,000 per failure for an individual. The review checks every position against the treaty text published on GOV.UK and confirms the saving clause does not cancel the relief claimed, which for US citizens it often does.

State filing

Leaving the US does not automatically end state residence. Several states look to intention to return, a retained home or a driving licence. California, for example, does not follow the FEIE and gives no credit for UK tax. If you are planning to move back, the review flags which state's rules will apply on return and whether an earlier state exit was properly documented.

The review checklist we work through

This is the checklist we build for each engagement. It is ordered so that the cheap, decisive checks come first.

1. Obtain IRS account transcripts for every open year and confirm what was actually filed and processed, including any notices.
2. List every non-US account and asset held at any point in each year, with peak and year-end values in dollars.
3. Compare Schedule B line 7a, the FBAR record and Form 8938 against that list.
4. Identify every collective investment held in an ISA, general investment account, SIPP or offshore bond, and classify each as PFIC or not.
5. Check for a Form 8621 per PFIC, the regime applied, and whether any disposals or switches occurred inside the ISA.
6. Rebuild employment income from December payslips, P60s and P11Ds on a calendar-year basis.
7. Recompute capital gains in dollars at transaction-date rates.
8. Model FEIE plus credit against credit only, and check Form 1116 categories and carryforwards.
9. Confirm UK tax was matched to the correct US year and converted at the correct rate.
10. Check for any 10%-plus holding in a non-US company and the related Form 5471.
11. List each treaty position taken, explicit or implied, and check for Form 8833.
12. Review state residence and filing history.
13. Cross-check the UK Self Assessment returns for the same years, so that any US correction does not create a UK inconsistency.
14. Document whether each error was non-wilful, with the evidence supporting that conclusion.

A worked example: three years reviewed

The client is a US citizen and senior executive living in London, married to a UK national and filing as married filing separately. Her UK accountant prepared her 2022, 2023 and 2024 US returns using the FEIE plus a foreign tax credit on the remainder. She asked for a review before refinancing with a US lender. The figures below are illustrative but typical.

The 2023 fund switch drives the outcome. With a holding period of about five years, roughly one-fifth of the $48,000 gain falls in the current year and is taxed as ordinary income; the remaining four-fifths, about $38,400, is taxed at the highest rate in force for each earlier year (37%), giving around $14,200 of deferred tax plus an interest charge. With the current-year slice and the omitted distributions, the additional federal tax across the three years came to roughly $30,000 before interest, with no UK tax available to credit because the ISA income was exempt in the UK.

Because there was unreported income and missing information returns, neither a plain 1040-X nor the delinquent information return procedure fitted cleanly. She met the non-residency test and the errors were plainly non-wilful: she had disclosed every account to her preparer, filed FBARs and paid every bill presented. The Streamlined Foreign Offshore Procedure resolved all three years with tax and interest only, no penalty, and a clean set of returns for the lender.

What happens when the review finds errors?

Once the findings are clear, there are four realistic outcomes. The table compares them.

Amending with Form 1040-X

Where the only problems are income, deduction or credit errors, and every required information return was filed, a Form 1040-X for each year is usually enough. It can be e-filed for the current and two prior years. Refund claims must be made within three years of filing or two years of payment, whichever is later. See About Form 1040-X.

Delinquent information return procedures

If the income was right but a Form 8938, 5471 or 8621 was missed, the IRS's delinquent international information return submission procedures let you file late with a reasonable cause statement. Penalties are not automatically waived, so the quality of that statement matters. Missing FBARs with no underreported income have a parallel delinquent FBAR route.

Streamlined Foreign Offshore Procedure

Where missed information returns and unreported income combine, as in the example, the Streamlined Filing Compliance Procedures are often the cleanest answer. Many people do not realise the foreign offshore version works for taxpayers who filed original returns: the three years are submitted as amended returns, alongside six years of FBARs and a signed certification of non-wilful conduct. You must have been physically outside the US for at least 330 full days in at least one of the three years and not have had a US abode.

Why the choice depends on non-wilful conduct

Every route above assumes the errors were non-wilful: negligence, inadvertence, a mistake, or a good-faith misunderstanding of the law. Relying on a UK accountant who did not understand PFICs is the textbook non-wilful case, especially where you gave them full information. The certification is made under penalty of perjury, though, and the narrative must be specific and true. If there are facts suggesting deliberate concealment, such as accounts withheld from the preparer, the streamlined procedures are not appropriate and the analysis moves to the IRS voluntary disclosure practice with specialist counsel. A good review documents the evidence on wilfulness before any filing decision is made. You can test the FBAR exposure on each route with our FBAR penalty calculator.

US and UK: what each side needs from a review

The UK side matters for two reasons. First, US corrections can change the foreign tax credit, so the UK returns need to be read alongside them. Second, the 2025 reforms to the UK treatment of foreign income mean some long-term residents are now paying UK tax on income that used to sit outside the UK net, which changes how much UK tax is creditable from 2025-26 onwards. Our UK tax services team reviews both sides together so that one fix does not create a mismatch on the other.

When is the right time to commission a review?

• Before a liquidity event: a business sale or large share disposal will be examined closely, and earlier gaps on Form 5471 or PFIC reporting are far easier to fix before the transaction than after.
• Before moving back to the US: a clean record matters for state residence, and the move itself creates US-only events that build on the earlier returns.
• Before a US mortgage: underwriters use IRS transcripts, and an amended return in progress can delay completion.
• When a new adviser raises doubts: an investment manager spotting UK funds in your portfolio is often the first sign of a PFIC problem.
• Before claiming the US main-home exclusion or selling UK property: the dollar gain and the currency gain on the mortgage both depend on earlier records.

Choosing who does the review

Ask for three things. First, evidence that the reviewer prepares US returns for UK residents every week, not occasionally. Second, a written scope listing each form and position examined, so that "reviewed" has a defined meaning. Third, a plain statement of the options and their consequences before any amendment is filed. Our US UK tax accountants work this way, and for clients with complex portfolios our high net worth team handles the review end to end. You can browse related guides for the individual forms covered above.

Speak to a specialist

If your US returns were prepared by a UK-only or generalist accountant and you want certainty before relying on them, we can review your filed returns, explain exactly what we find, and recommend the most proportionate fix. To arrange a confidential consultation, contact our cross-border team today.