Thanks for bringing this up! I checked and the second notice is dated about 3 weeks after my payment was processed. So unfortunately it's not just a timing issue. And yes, I specifically selected tax year 2018 Form 1040 when making the payment online - I was very careful about that since I didn't want any mix-ups. I think what might have happened is that the payment went through but wasn't applied to the specific CP22A balance. Maybe it was applied to the original tax liability but not to the additional assessment? The whole thing is so confusing and there's no way to check exactly where the payment was applied online.

That's definitely more concerning then. You're probably right about the payment being misapplied within the same tax year. The IRS has different "buckets" for different types of assessments, even within the same tax year. When you do manage to speak with someone (either through regular calls or using one of the services mentioned above), specifically ask them to check ALL modules for tax year 2018 to locate your payment. Make sure they know it was in response to a CP22A so they can properly apply it to the additional assessment rather than just the original tax liability. Be sure to have your payment confirmation number handy when you call. That's the fastest way for them to trace where your money actually went in their system.

This is great advice. The transcript will show all transactions for the tax year including payments, assessments, penalties, and interest calculations. Look for transaction code 670 which indicates a payment was received and applied. The date and amount should match your payment.

That's a great point I hadn't considered. Do you know if there's a specific form or method for documenting the basis value as of my residency date? Did you use a particular service for your valuation?

There's no specific IRS form for documenting your starting basis, but you should create your own detailed records. I used a business valuation service in my home country that was familiar with US tax requirements. They produced a comprehensive report that I keep with my tax records. The method used depends on your business type - for my service-based LLC, they used a multiple of earnings approach. For businesses with more assets, they might use different methods. The key is having a defensible, third-party valuation you can produce if ever questioned. It cost me about $1,500 but was absolutely worth it for the peace of mind.

I tried TurboTax last year for my 5471 with dual status and it was a disaster. The software doesn't really handle the dual status situation well with foreign entities. It kept trying to report my full-year income even though I clearly indicated my residency date. I ended up having to use a tax professional instead.

Thanks for this insider perspective. So if I understand correctly, as a genuine recovery startup (formed after Feb 2020), I might actually be at lower risk than established businesses? That's somewhat reassuring. About the voluntary disclosure program - would using that be essentially admitting I did something wrong? I believe my claim was legitimate based on the recovery startup provisions, but now I'm second-guessing everything because of the company I used.

Yes, recovery startups generally face less scrutiny because your eligibility was based on clear criteria (formation date, gross receipts under the threshold) rather than the more subjective "partial shutdown" or "significant decline in gross receipts" tests that established businesses had to meet. The voluntary disclosure program isn't necessarily an admission of wrongdoing - it's designed for businesses who, after review, believe their claim may not fully qualify. If you believe your claim as a recovery startup was legitimate, there's likely no need to use this program. Instead, focus on organizing your documentation. Make sure you have clear records showing: 1) formation after February 15, 2020, 2) evidence of actual business operations (not just a paper entity), 3) documentation of qualified wages paid, and 4) gross receipts under the threshold. The IRS is primarily targeting obviously fraudulent claims first, particularly those made by established businesses using aggressive interpretations of the shutdown provisions.

If the IRS disallows your ERC, you'll likely need to file amended returns for the year(s) affected. The wages you used for ERC would become fully deductible again, which could actually reduce your taxable income for that year. So there's potentially a small silver lining if you have to repay.

Thanks for pointing this out. I actually think we might have messed up how we entered our income on the calculator. We put in our annual salaries but I'm wondering if we should have included the value of our benefits too? We both have health insurance, dental, and contribute to our 401ks - none of which we included in the calculator. Would that make a difference in the withholding calculation?

No, you did that part correctly. The withholding calculator wants your gross income before any deductions for benefits or 401k contributions. What might have happened is that you may have entered something incorrectly in the "adjustments" section. The new W4 form is confusing because it asks for "deductions other than the standard deduction" rather than total deductions. I'd suggest trying again with the calculator but check each entry carefully. Make sure you're entering your anticipated tax credits correctly too. And be sure to indicate that you're married filing jointly on both of your W4 forms. Another possibility is that your previous withholding as single filers was too low, and the calculator is now correcting for that on top of your married status, which would explain the large adjustment.

In most cases, filing jointly is better. Filing separately means you lose a lot of tax benefits like student loan interest deduction, child tax credits, earned income credit, etc. It's usually only beneficial in very specific situations like if one spouse has huge medical expenses or income-based student loan payments. I'd recommend running your taxes both ways before deciding, but for most couples, jointly is the way to go.

Thanks for the info! I didn't realize filing separately meant losing so many deductions and credits. We have student loan interest deductions so it sounds like joint is probably still best for us. I guess I'll just have to accept the higher withholding for now and see what happens when we actually file next year. Maybe we'll end up with a nice refund to make up for the monthly budget squeeze.

Would this apply if we never actually filed jointly though? From what I understand, he just took my W2s and never filed anything at all. Can I still claim innocent spouse if there were no joint returns?

Ah good point - Innocent Spouse Relief typically applies when joint returns were actually filed with errors or underpayment. If no returns were filed at all, that's a different situation. In your case, you'd focus more on explaining the circumstances when you file your returns and potentially requesting penalty abatement due to reasonable cause. The IRS does consider situations involving domestic abuse as potential reasonable cause for penalty relief. The most important thing is to get those returns filed now and explain your situation - they're usually willing to work with you on a payment plan for any taxes owed.

Yes, First Time Abatement (FTA) can be really helpful! However, it typically only applies to one tax year. With multiple years unfiled, you might get FTA for the earliest year but would need to request reasonable cause abatement for the others.