UK Ltd questions: likely tax owed, trustworthy preparers, split accounting-period reporting on 5471, and worse case scenarios
Status:
- Born in US, left as a child. Already have other citizenships.
- Late 30s.
- No financial life or assets in the US.
- Married to a non-US citizen.
- Been based in the UK for decades, recently relocated to another country in Europe.
- Learnt about US and global taxation in early 2010s, panicked like many of you did, did SFOP with a known expat firm, been reporting ever since. Never owed anything.
- Late on 2024 filing. Was missing data, then overwhelmed with life/work. Not complex, similar to years before (salary only + FBARs). Filed written extension last year. Not worried about catching up on this one. No penalties expected.
- For 2025, I set up a UK Ltd with spouse to do contracting for a big client. Based on own research, likely a CFC due to attribution since we both own it. Made a decent amount, nothing life changing (waiting for UK accountant to finalise corp tax numbers for UK). Filed extension to Oct 15 2026. 10K penalty wouldn't apply (yet) because company was formed in 2025 so not late on it.
- For the Ltd, before setting up, I tried to get UK/US advice from experts but because there were crypto vesting schedules from the client (nothing dodgy / legit client / known name), nobody wanted to touch it. Tried big names for advice, they quoted me an insane amount of money just for the advice, more than I could pay. Found a UK one who seemed to know what they were talking about at a reasonable price, using them for UK end of things. I should have done better research but still I think would be in the same situation because of attribution (no way to set up the Ltd where wife's shares aren't attributed to me).
- Lost big client early this year, so no income now. Living off savings. Relocated to a cheaper country, near wife's family in order to preserve savings because wife was pregnant with 3rd kid when client cancelled (yeah... that wasn't fun), so had to focus on being ready for the birth instead of work. Want to stay here near wife's family. Not sure where income will come from yet, helping take care of newborn and handling necessary local admin first, so not focused on work yet. Will start looking from next month, but worried because AI is eating up what I specialised in.
Questions:
- Likely tax owed: What might I owe the IRS if the company is an CFC? From what I can tell, it could be nothing because UK corp rates are higher than US. Is this right? Anyone with experience that can share what they paid? EDIT: to be specific, a large chunk of the expenses were pension contributions into our UK pensions.
- Trustworthy preparers: Any advice on which expat preparers you would trust / not trust with this (5471, GILTI, etc)? I'm shopping around, I've contacted several expat specialist firms (many listed in posts in this sub) and the difference in answers I got didn't reassure me that they all know what they're doing.
- Split accounting-period reporting on 5471: Like every UK Ltd, my accounting period spans two calendar years. Most revenue was in the first calendar year and most expenses in the second. Does US reporting on Form 5471 follow the company's own accounting period, or is it split by US calendar year (which would wrongly show big profit in year one and a loss in year two rather than the expenses offsetting revenue across the single period)?
- Worse case scenarios: If I never plan on living in the US... if I don't have any assets there... if I'm not getting Social Security... if I don't live in one of the 6 countries on the MCAR list - to repeat what many others have asked me when they see me looking worried: what would/could happen if I stopped filing? I'm asking purely out of curiosity, not intent. I know many older citizens living abroad who get SS, who never filed anything, who definitely pass the income thresholds, who definitely pass the FBAR thresholds... and never had any trouble. No letters, nothing. And they're getting SS payments, for decades! They've bought and sold houses. It baffles me that they're care free, while I'm terrified. I don't have a good answer for those who ask me what would happen if I just stopped. I want to be compliant, I'm losing way too much sleep over this, but I'm also worried I'm going to lose the savings that right now are feeding my family.
Thank you all.