So I need to separately file the 1040X through official channels while also responding to this notice? Does the 1040X need to be mailed to a different address than my response letter? And how do I make sure they connect the two?

Yes, you need to file the 1040X separately through official channels. The amended return should go to the IRS address specified in the 1040X instructions, which varies depending on where you live. For your response to the notice, send it to the exact address listed on the notice itself. In your response letter, specifically mention that you've also filed a 1040X and include the date you mailed it. Include a copy of the 1040X with your response letter as well (even though you're also mailing the original to the proper processing center). To help connect the two, include your notice number on both documents. Also, attach a clear explanation with both submissions that references the other submission. For example, on your 1040X write "This amended return is being filed in response to IRS Notice CP2000 dated [date]" and attach a copy of the notice.

Did you have to go through an official appeals process or did the explanatory letter work? I'm facing a similar issue and wondering if I should just skip straight to appealing.

We both kept the same jobs all year, so I don't think that's the issue. And we've always just taken the standard deduction - neither of us has enough deductions to itemize. But your comment made me realize we do have different pay structures. I get a base salary plus quarterly bonuses, and my wife gets paid hourly plus overtime. Could that be causing weird withholding calculations?

Yes, that could definitely contribute to the issue! Bonus payments and overtime are often withheld at a flat 22% rate for federal taxes, which might not be enough based on your combined income tax bracket. When you have variable income like bonuses and overtime, the withholding calculations can get tricky because payroll systems typically calculate each paycheck's withholding independently without considering your annual total. This is especially problematic when you file jointly, as the combined income from both regular earnings and variable compensation can push you into a higher bracket than what was used for withholding.

This! The refund isn't what matters - it's the total tax you're paying. A refund just means you gave the government an interest-free loan all year.

That's a really good point about comparing total tax liability instead of just refund/amount owed. I just checked and our combined total tax is actually about $800 less than what we paid separately last year! So I guess married filing jointly IS better for us, but our withholding was just way off. Definitely going to update both our W-4s with that "married but withhold at higher single rate" option. Thanks for the tip!

Oh man, I didn't even think about state taxes! I was living in California before I moved to Australia, and now I'm back in California again. Do states have their own version of FBAR requirements? This just keeps getting more complicated...

California doesn't have a separate FBAR form, but they do require you to report worldwide income on your state tax return. When you file amended federal returns as part of the Streamlined process, you'll need to file amended California returns too. The bigger issue with California is they're much more aggressive about imposing penalties for underpayment if you had interest or investment income from those Australian accounts that wasn't reported. Be sure to address both the federal and state aspects when you're fixing everything. This is another reason why getting professional help with the Streamlined Filing is worth it - they'll handle both levels of government for you.

Yes, you generally need to report your superannuation account on your FBAR if the total of all your foreign accounts exceeded $10,000 at any point during the year. The accessibility of the funds doesn't matter for FBAR reporting requirements - it's about financial interest in or signatory authority over foreign accounts.

This is actually a really good point that I hadn't fully considered. I've been so focused on the "keep vs spend" part of the equation that I wasn't thinking about investment alternatives. What kind of returns should I be comparing against when making these decisions?

You should be comparing against what that money could reasonably earn if deployed elsewhere in your business or investments. For example, if investing that same $110k in new equipment or marketing could generate a 15-20% return, that's likely better than the one-time tax savings from a vehicle purchase. For many small businesses, having available capital for unexpected opportunities or challenges is also valuable. I've seen too many business owners become "cash poor" after making large purchases primarily for tax reasons, only to miss out on better opportunities later. It's about balancing immediate tax benefits against long-term business growth and flexibility.

That's a good saying! My dad always told me "nobody ever went broke by paying taxes, but plenty have gone broke trying to avoid them" lol

I hadn't even thought about that! Do you know if I can still do an Offer in Compromise once my debt has been sent to a collection agency? And did you need to hire a tax professional to help with yours or did you do it yourself?

Yes, you can still do an Offer in Compromise even if your debt has been sent to a collection agency. The collection agency is just working on behalf of the IRS, but all settlement decisions still go through the IRS itself. I initially tried doing it myself using the IRS forms (Form 656 and 433-A), but I made some mistakes on the financial statement. I ended up using a tax resolution firm that cost me about $1,500, but they got me a much better offer than I would have managed on my own. If your situation is fairly straightforward, you might be able to do it yourself, but having someone experienced can really help if your case is at all complicated. The key is documenting your true financial situation accurately.

This is so important! How can you tell the difference between legit collectors and scammers? I've been getting calls about tax debt but I'm scared to even talk to them.