The acronyms, decoded.
Cross-border tax runs on abbreviations that mean nothing until one of them applies to you. Each entry explains what the term actually is, why it exists, and where it catches people.
FBAR
The Foreign Bank Account Report — FinCEN Form 114 — and its $10,000 aggregate trigger.
PFIC
Passive Foreign Investment Company — the US label that catches most UK funds, and why it hurts.
FEIE
The Foreign Earned Income Exclusion — Form 2555 and the choice against foreign tax credits.
Streamlined Procedures
The catch-up route: 3 years of returns, 6 of FBARs, one certification — penalty-free on the Foreign route.
Substantial Presence Test
The day-count formula that makes visitors into US tax residents.
Saving Clause
The treaty provision that lets the US tax its citizens as if the treaty didn't exist.
Definitions at a glance
- FBAR
- FinCEN Form 114, filed annually by US persons whose non-US financial accounts together exceeded $10,000 at any point in the year. Separate from your tax return, filed with a different agency, and carrying its own penalties.
- PFIC
- A non-US company earning mostly passive income or holding mostly passive assets — which describes most UK funds, OEICs, unit trusts and ETFs. For US persons, holding one can trigger the most punitive tax regime in the code.
- FEIE
- An election on Form 2555 letting qualifying Americans abroad exclude a six-figure amount of earned income from US tax. Popular, often the right answer — and often not, in a high-tax country like the UK.
- Streamlined Procedures
- The IRS route back for Americans abroad who didn't know they had to file: three years of returns, six years of FBARs, a sworn statement that the failure was non-willful — and, on the Foreign route, no penalties.
- Substantial Presence Test
- The formula deciding when time in the US makes you a US tax resident: this year's days, plus a third of last year's, plus a sixth of the year before. Reach 183 — with at least 31 days in the current year — and the IRS taxes your worldwide income.
- Saving Clause
- Article 1(4) of the US-UK treaty: each country reserves the right to tax its own residents, and the US its citizens, as if the treaty had not come into effect. It is the single most misunderstood sentence in expat tax.
Met one of these terms in a letter?
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