Oh wow I didn't even consider this. Do you know if that's something I'd have to do in person or can it be handled remotely? I'm based in Manchester so getting to a US embassy isn't super convenient.

You can handle it remotely! There are two main approaches: You can submit Form W-7 (ITIN application) along with your tax return and certified copies of your identification documents (typically your passport). This can be done by mail, but it means your refund will be delayed until your ITIN is processed. Alternatively, there are Certified Acceptance Agents (CAAs) in the UK who can verify your identity documents in person so you don't have to send original documents or certified copies. Many accounting firms that handle US tax matters are also CAAs, which might be another reason for the fees you were quoted.

How long did it take to get your refund? I'm wondering if these specialized services actually process things faster than just hiring a regular accountant.

This is super helpful, thanks! Quick question - how much is considered a "larger amount" that might trigger more scrutiny? Are we talking $10k, $50k, $100k+?

There's no fixed threshold, but generally speaking, the Criminal Investigation division typically focuses on cases involving substantially higher amounts - usually $100k+ in unpaid taxes. That said, smaller amounts can still trigger criminal investigation if other aggravating factors are present (like a clear pattern of evasion, hiding assets, or lying to investigators). The IRS has limited resources for criminal prosecution, so they tend to focus on cases that are either very substantial in dollar amount or have clear evidence of fraudulent intent. For most people with moderate tax debts who are making efforts to comply, the focus is on collection rather than prosecution.

Yeah this is true. From what I read, it was like a pattern over multiple tax years with substantial income. I think that's the big difference between that case and just owing money that you're paying through an installment plan.

Check if you entered all the wash sales correctly. I had a similar issue and realized I missed marking some transactions as wash sales. Also, make sure you're entering the correct adjustment code if your broker provided one (like "W" for wash sale or "B" for basis reported to IRS). Those small details can cause discrepancies.

Also make sure you included any transaction fees or commissions in your basis. Some brokers include these in the reported basis on the 1099-B, but others list them separately. FreeTaxUSA has fields for adding these to your basis if needed.

Did filing jointly affect how your husband claimed his business expenses at all? That's one thing I'm worried about - if somehow his carpentry deductions would be limited if we file together.

Not at all! He claimed exactly the same business expenses either way. The Schedule C for his business worked exactly the same whether we filed jointly or separately. All his tools, materials, vehicle expenses, studio rent, insurance - everything was deductible exactly the same way. The only difference was that when we filed jointly, all those business deductions helped offset our combined income, plus we qualified for additional credits that saved us thousands. If we had filed separately, I would have gotten some credits for the kids, but not as much as when we combined everything, and we would have lost some credits entirely.

Self-employment tax is calculated the same way regardless of filing status. It's always 15.3% of net business profit (12.4% for Social Security up to the wage limit and 2.9% for Medicare on all profit). Filing jointly doesn't change this amount. What filing jointly DOES help with is the income tax portion, where you get better rates and more credits. So while the SE tax stays the same, your overall tax burden is usually lower when filing jointly because of how everything else is calculated more favorably.

Thanks for explaining that! I guess we were confusing the SE tax with regular income tax. Makes sense that the 15.3% stays the same regardless. Good to know the filing status mainly affects the income tax portion.

Which state are you in? I'm in California and wondering if I need to handle this differently for state taxes.

I'm in Massachusetts, which generally follows federal treatment but has a few differences for reporting. In California, they mostly follow the federal treatment for excess contribution withdrawals, but you should still report the distribution on your CA return. The main thing is to make sure the state knows the nature of the withdrawal (correcting an excess contribution) so it's not mistakenly treated as an early distribution subject to penalties. The tax software should handle this correctly if you input the 1099-R information properly, but it's worth double-checking the state section specifically.

You should definitely get credit for the withholding! Check your 1040 - the withholding from your 1099-R should be included in the total federal income tax withheld on line 25d. Sounds like something else in your return might have been causing you to owe.