I went through this last year. It took about 8-10 weeks for them to process my response and clear the issue. The IRS is ridiculously slow with paper processing. I called after 6 weeks and they just told me to keep waiting.

How exactly do I calculate the right amount of extra withholding to put on my W-4? Is there a formula or calculator you'd recommend?

A simple approach is to take your expected freelance income for the year and multiply it by 30% (which covers both income tax and self-employment tax for most people). Then divide that amount by the number of pay periods you have at your regular job. For example, if you expect to make $5,000 in freelance income and get paid bi-weekly (26 pay periods), you would calculate: $5,000 × 0.30 = $1,500 in estimated taxes ÷ 26 pay periods = about $58 extra withholding per paycheck. You'd put that amount on line 4(c) of your W-4 form. The IRS also has a tax withholding estimator on their website that's more precise if you want to get it exactly right.

I've been doing freelance work for years and never made quarterly payments (don't tell the IRS lol). Never had any penalties. Is it really that important?

Thanks for mentioning Publication 556. I just looked it up and it's actually really helpful. Did anyone have success citing these specific code sections in their appeal? I'm working on my appeal letter now and trying to include all the right references.

I've helped several clients through this process. When citing Section 6511, make sure to specifically mention subsection (a) which covers the period of limitation on filing claims. Also reference Revenue Ruling 2003-41 which addresses reliance on erroneous IRS information. The most successful appeals I've seen also include a timeline of events and screenshots of the conflicting information. Be sure to mention that you exercised "ordinary business care and prudence" by checking the official IRS website for deadline information and acting accordingly. This language directly ties to reasonable cause standards the IRS uses to evaluate appeals.

Did you need any special documentation when you contacted your rep's office? I'm thinking of trying this approach but not sure what to send them initially.

This is a really good point about state taxes. I'm originally from California and they kept trying to claim me as a resident for tax purposes for years after I moved to France. I had to provide extensive documentation proving I had no intention of returning to California. Also, the FATCA thing is real - my French bank made me fill out a W-9 form once they realized I was a US citizen, and they definitely report my account information to the US authorities.

California is particularly aggressive about maintaining tax residency. They look for any connection (driver's license, voter registration, family ties, etc.) to claim you're still a resident. Other problematic states include New York, Virginia, and New Mexico. The FATCA reporting is a double-edged sword for expats. On one hand, it means the IRS likely already knows about your foreign accounts, which increases the importance of proper filing. On the other hand, it's caused some foreign banks to refuse US clients altogether due to the reporting burden. It's unfortunately part of the reality of being a US citizen abroad.

The UK-US tax treaty does help with investment income but it's complicated. Generally, you can claim foreign tax credits in the US for taxes paid to the UK on the same income. For US-source investment income like your US investments, you'll typically pay US tax on those first, then declare them on your UK return and get credit for the US tax paid. For dividends specifically, the treaty usually reduces withholding rates. Interest and capital gains have their own rules too. I recommend keeping very clear records of all taxes paid in both countries so you can properly claim credits.

Is there a deadline for the IRS to process prior year returns and issue refunds? I filed my 2021 return about 2 months ago and haven't heard anything.

The IRS doesn't have a specific deadline for processing prior year returns, but they typically take longer than current year returns. Prior year returns are usually processed manually rather than through their automated systems, which adds to the processing time. Generally, you can expect a processing time of 6-12 weeks for paper returns, but for prior year returns, it can sometimes take 16 weeks or more. If it's been more than 16 weeks since you submitted your return, you can call the IRS or use their "Where's My Refund" tool, though that tool sometimes doesn't work well for prior year returns.

Actually I think there was a separate phaseout for the additional amount over $2,000. The original $2,000 CTC didn't start phasing out until $200k single/$400k married.

You're absolutely right, thanks for that correction! The 2021 Child Tax Credit had two different phase-out thresholds: The enhanced portion (the extra $1,600 for kids under 6 or $1,000 for kids 6-17) started phasing out at $75,000 for single filers and $150,000 for married filing jointly. The base $2,000 credit didn't start phasing out until $200,000 for single filers and $400,000 for married filing jointly. This was one of the more confusing aspects of the 2021 tax changes. Thanks for pointing that out!