Case Study: US Expat in the UK Files 6 Years of Back Taxes and Gets $13,200 Back

US Expat UK Back Taxes: Case Overview

How Did She Find Out She Needed to File?

Sarah, not her real name, moved from Boston to London in 2018 for a role in financial services.

She still flies back a few times a year to see family, but when it came to taxes, she had quietly assumed that paying UK tax through PAYE meant her IRS obligations were done.

That changed in early 2024 when she stumbled on an article about US expat taxes and found out that US citizens are required to file federal returns every year regardless of where they live and to report foreign bank accounts annually through something called the FBAR. She had never heard of either requirement.

Her first instinct was to handle it herself. Her salary was well under the Foreign Earned Income Exclusion threshold, so the plan seemed simple: file the back returns, claim the FEIE, owe nothing, move on.

Before she started, she decided to book one consultation just to make sure she was on the right track.

That call with Universal Tax Professionals changed the plan entirely.

The FEIE sounds like the obvious choice for expats with modest income, and Sarah had every reason to think it would work.

But the FEIE has a significant drawback that most people don’t know about: it blocks access to refundable credits, such as the Additional Child Tax Credit.

If she had filed on her own using the FEIE, she would have left thousands of dollars on the table.

The Full Picture: What Sarah Was Dealing With

Once UTP completed a thorough discovery review of Sarah’s financial situation, it became clear her case involved several intersecting obligations, each with its own rules, forms, and deadlines:

1. Six Years of Unfiled US Tax Returns

Sarah had not filed a Form 1040 since leaving the US. Under US law, citizens are required to file federal tax returns every year regardless of where they live, if their income exceeds the filing threshold.

As a salaried employee in London, Sarah’s income was well above that threshold every year.

2. Six Years of Unfiled FBARs

Sarah held a UK current account, a UK savings account, and an ISA (Individual Savings Account).

Because the combined balance of these accounts exceeded $10,000 at various points during the year, she was required to file FinCEN 114, the FBAR, annually. She had never done so.

3. PFIC Reporting for Her UK ISA

This is the complication that surprises most UK-based US expats: the funds commonly held inside a UK ISA are classified as Passive Foreign Investment Companies (PFICs) under US tax law.

Sarah held an ISA with investment funds inside it. Because those funds were non-US pooled investment vehicles, each one was a PFIC in the eyes of the IRS, and each required its own Form 8621 filing for every year it was held.

Failure to file Form 8621 means the statute of limitations on those returns never starts running, leaving them permanently open to IRS review.

4. Unclaimed Child Tax Credit Refunds

Sarah had two US-citizen children, aged 9 and 12 at the time of the Streamlined filing, who had lived with her in London throughout her time abroad. She had no idea she was eligible to claim the Child Tax Credit on her US returns.

The Additional Child Tax Credit (ACTC) is the refundable portion of the CTC, meaning the IRS pays it out even when a taxpayer owes no US tax at all.

For expats who use the Foreign Tax Credit to zero out their US liability, the ACTC becomes a direct cash refund. The maximum refundable amount per child is set by law and adjusts for inflation each year.

Here is exactly what Sarah was owed, and what she received:

Sarah’s ACTC Refunds: What She Was Owed and When She Received It

The Streamlined refunds, $9,800 across the three covered years, arrived roughly four to five months after the submission was mailed.

Sarah went into the process braced for a bill. The IRS sent her money instead. She then filed her 2025 return with UTP as a regular annual filing and received another $3,400, bringing her total to $13,200 in refunds across all four years.

Many expats miss the ACTC entirely because they assume tax credits don’t apply abroad, or because they chose the FEIE and unknowingly blocked their eligibility.

Catching up on back taxes is not always just a compliance cost, sometimes it pays.

The Solution: IRS Streamlined Foreign Offshore Procedures

The Streamlined Foreign Offshore Procedures (SFOP) are an IRS compliance program designed for US citizens living abroad who have fallen behind on their filing obligations through non-willful conduct. Sarah met every qualifying criterion:

• She had lived outside the US for at least one of the three most recent tax years
• She had not filed US returns due to a genuine lack of awareness, not intentional evasion
• She was not currently under IRS audit or examination

Under SFOP, UTP filed:

• 3 years of Form 1040 federal income tax returns, using the Foreign Tax Credit (FTC) to offset UK taxes already paid, and claiming the Child Tax Credit and ACTC where applicable
• 6 years of FinCEN 114 (FBAR) filings covering all of Sarah’s UK bank accounts and ISA
• Form 8621 for each fund held inside Sarah’s ISA, for each applicable year, using the Mark-to-Market election where it produced the most favorable outcome
• Form 14653, the signed Streamlined certification documenting the non-willful nature of her non-compliance

How UTP Handled Sarah’s Case: Step by Step

Step 1: Discovery and Scope Assessment

Our onboarding process began with a comprehensive review of Sarah’s income history, UK accounts, ISA holdings, and family situation.

This is where we identified the PFIC exposure from her ISA funds and confirmed her children’s eligibility for the Child Tax Credit, both details that would have been missed had she filed on her own using the FEIE approach she had initially planned.

Step 2: Tax Strategy — Foreign Tax Credit Over FEIE

Sarah had planned to use the Foreign Earned Income Exclusion since her salary was well under the threshold. But the FEIE would have disqualified her from the Additional Child Tax Credit, a refundable credit that put real money back in her pocket.

For UK-based clients, the Foreign Tax Credit (FTC) almost always produces a better result anyway, since UK tax rates typically equal or exceed US rates, largely eliminating any remaining US tax liability. We used the FTC across all three of Sarah’s returns.

Step 3: Preparing Three Years of Returns with PFIC Schedules

Each Form 1040 included all required international schedules, including Form 8621 for each fund held inside Sarah’s ISA.

We applied the Mark-to-Market (MTM) election under IRC Section 1296, which allowed Sarah to recognize gains and losses annually rather than facing the default PFIC tax regime, which applies an interest charge on deferred gains and taxes distributions at the highest ordinary income rate.

Step 4: Filing Six Years of FBARs

We filed FinCEN 114 for each year covering Sarah’s UK current account, savings account, and ISA.

The ISA required particular attention: while ISAs are free from UK tax, they receive no special US tax treatment and must be reported both on the FBAR (if the threshold is met) and potentially on Form 8938 under FATCA.

Step 5: Claiming the Child Tax Credit Refunds

Across the three return years, UTP identified and claimed the Additional Child Tax Credit for both of Sarah’s children.

With her US tax liability near zero after applying the Foreign Tax Credit, the ACTC generated refunds of $3,200 for 2022, $3,200 for 2023, and $3,400 for 2024, totaling $9,800.

Step 6: Drafting and Submitting the Streamlined Certification

The Form 14653 certification was drafted to accurately document the reasons for Sarah’s non-compliance, her genuine belief that paying UK taxes discharged her US obligations, discovering the filing requirement through an online article, and her immediate steps to get compliant.

The submission was mailed to the IRS Streamlined processing center with a clear instruction from Sarah’s accountant from Universal Tax Professionals.

Step 7: Resolution and Ongoing Filing

Sarah’s Streamlined submission was accepted and all penalty exposure, failure-to-file penalties, potential FBAR penalties, and PFIC-related penalties, was waived in full.

She then filed her 2025 tax return with UTP as a regular annual filing, generating another $3,400 in ACTC refunds for that year.

Across the Streamlined years and her first annual filing, she has received $13,200 in total refunds. She is now fully compliant and files every year through UTP.

The Full Timeline: From First Call to Refund in Hand

One of the first things clients want to know is how long the process takes. Here is how Sarah’s case unfolded from the initial consultation to the IRS refunds arriving:

One thing worth knowing: unlike some IRS programs, the Streamlined procedures do not end with a formal acceptance letter or closing notice.

The IRS processes the returns like any other paper filing, silence is the expected outcome, and refunds are issued through the standard pipeline. UTP keeps clients informed throughout and advises on when to begin filing annually again.

The Results: Before and After

What US Expats Say About UTP

Universal Tax Professionals holds a 4.9-star rating both on Google Reviews and Trustpilot. Here is what some of our clients have shared:

⭐⭐⭐⭐⭐
“I cannot speak highly enough of Universal Tax Professionals. I was extremely intimated to even begin the process of filing my US taxes while living abroad, especially being behind for 3 years. From the first inquiry until the completed tax returns, the Universal Team answered all of my questions in a timely & thorough manner and guided me step-by-step to gather the necessary documents for my expat taxes.

Very efficient while being personable to my unique situation. It was clear from the beginning that this business has a genuine heart to help people and this is shown by their great attention to detail and professionalism. I highly recommend Universal!!

– Megan (Verified Trustpilot Review)

⭐⭐⭐⭐⭐
“This winter I learned I had put myself in a position of needing to streamline my taxes (4 years of 1040’s) and file 5 years of FBARS. Not being rich and having a zillion dollars in offshore accounts, I thought I could do it alone, but eventually became overwhelmed, felt like and idiot and started looking for help.

I was absolutely terrified to send all my info out to strangers, ONLINE, did they exist, was it true, were they theives, would I lose all my money (which is not very much, but you get it), checking and double checking their credentials. I even wrote to the IRS, and a guy that gave them a good review on Facebook.

Both Josh and John were patient, fabulous, brillitant, answered all my questions in an easy to follow manner, and fixed a huge stack of papers which, once I actually sign them and send them in, will get me up to date with all my everythings.

I could not done it without them. Plain and simple. My saviors.

– Hage, (Verified Trustpilot Review)

⭐⭐⭐⭐⭐
“I have been using this company for the last seven years and will continue to do so. They work quickly and efficiently. If I have had any questions they’re answered very quickly, usually less than 24 hours later, and we’re even willing to take calls on my behalf to let me voice my concerns. They’re the best and you are definitely in good hands with them!”

– Angela, (Verified Google Review)

Why US Expats Around the World Trust Universal Tax Professionals

Most US tax firms can handle a simple expat return. Far fewer are equipped for what expat tax actually looks like in practice, years of unfiled returns, foreign accounts that need reporting, investment funds that trigger PFIC filings, businesses with cross-border structures, and credits like the ACTC that most clients don’t even know they’re entitled to. That is the work UTP was built for.

Universal Tax Professionals was founded by Josh Katz, a Big 4-trained CPA who is himself an American expat. UTP serves clients in over 100 countries, and the firm’s reputation is built specifically on the cases that other preparers turn away or get wrong.

• Dedicated accountant from start to finish — every client is assigned a licensed CPA or Enrolled Agent who handles their case personally. You can email or call them directly at any point in the process. No ticket systems, no generic support desks, no being passed between people who don’t know your file
• 100% success rate on Streamlined Filing — every client who has come to us behind on their US taxes has gotten compliant without IRS penalties, whether they were 2 years behind or 10
• Complex situations are our specialty — PFIC reporting, Form 5471 for foreign corporations, GILTI calculations, foreign partnerships, multi-country business structures, and dual-status returns that most generalist preparers won’t touch
• In-house team only — your return is never outsourced; every person who touches your file is a licensed professional on our team
• Global partner network — we work with trusted local tax firms in the UK, France, Spain, Germany, Mexico, Ireland, Italy, Portugal, and other countries to coordinate your US and local filings in sync, so nothing falls through the gap between two separate advisors
• We find what others miss — the ACTC, treaty benefits, foreign tax credit optimization, and other planning opportunities that a rushed or generalist return routinely leaves on the table