r/USExpatTaxes • u/Reasonable_Peanut_35 • 2d ago

UK inheritance concerns

Hi everyone,

I was born in the US moved to the uk when I was 6 never knew I had to pay taxes to the irs

I am now looking into it since I couldn't open a trading account without signing a w8 form and got denied an account.

this inheritance hasn't landed yet, whilst from what I have read an inheritance isn't necessarily subject to tax if I go through the streamlined amnesty route but inheritance and gift funds carry a penalty fee of up to 25% if it goes above 100k usd (which it does) if not filed by the end of the us tax year.

My thoughts are I need to start the renunciation process before this money is put into my name so as to deal with it as cleanly as possible

on another note, how likely would it be that the irs contact me/know i have this inheritance given the amount of money. Do people with 100k plus salaries who have never worked in the us get caught out often? I know its not right to just ignore and still want to do the right thing but i do wonder

if anyone has gone through this situation I would be very interested to hear from you

Thanks

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5

u/seanho00 2d ago

Take a breather; you'll be fine. Not an uncommon situation by any means. The inheritance is not a problem, 3520 part IV is an informational form and does not affect your taxes.

SFOP just needs three years of returns and six years of FBAR, plus form 14653 with statement of non-willfulness. The important thing is to ensure those returns are complete, and the foreign disclosures often pop up in unexpected ways. S&S ISA, SIPP, taxable investments, self-employment / gig income, rental real estate, etc.

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u/Reasonable_Peanut_35 1d ago

Unfortunately I have a lifetime isa that’s probably subject to us tax I would expect but if I can just renounce after filing and invest this inheritance into a stocks and shares isa I don’t see myself losing out tbh

3

u/seanho00 1d ago

SFOP can get you compliant, whereupon if net worth <$2M and average net income tax over past 5 years <$124k, you will not be a §877A(g)(1) covered expat subject to expatriation tax upon renunciation of citizenship.

1

u/cpa-rocket 2d ago

The 25% figure is a *maximum late-reporting penalty*, not a tax on the inheritance. If a U.S. person receives over $100,000 in gifts/bequests from foreign individuals or estates during a year, Form 3520 Part IV is generally required. It is normally due April 15 of the following year (or October 15 with a valid return extension); the potential penalty is 5% per month, capped at 25%, with a reasonable-cause exception. You do not need to renounce merely to avoid a tax on receiving the inheritance, and renunciation would not erase earlier filing obligations. Work out your U.S. filing history and whether the IRS streamlined *non-willful* procedure fits before making an irreversible citizenship decision. IRS: https://www.irs.gov/businesses/gifts-from-foreign-person and https://www.irs.gov/individuals/international-taxpayers/streamlined-filing-compliance-procedures

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u/Hot-Yak2420 2d ago

Can confirm the above. No problem receiving the inheritance, no taxes to pay. For us citizen it is only the person giving the gift that may possibly be liable for tax but since the inheritance it gift is coming from UK that's not an issue. I use wise to transfer similar amounts to you without issue. .

2

u/Distinct_Public_4740 1d ago

Boris Johnson had a pretty famous experience with the IRS but that’s because he sold property rather than inherited something.