Received IRS tax bill from 10 years ago - can I contest as an expat who never earned US income?

This is unfortunately a common situation with expats. The IRS has a 10-year collection statute of limitations, which means they can attempt to collect for 10 years after assessment. However, there are several ways you might be able to address this: First, you could request a "first-time penalty abatement" which the IRS often grants if you've been compliant with filing and payments in previous years. This would eliminate the failure-to-pay penalties, though not necessarily the interest. Second, you might qualify for "reasonable cause" relief if you can demonstrate you weren't properly notified. The fact that they were sending notices to an incorrect address while having your correct address for the stimulus payment could support this claim. Third, you might want to look into whether the Foreign Earned Income Exclusion actually covered these investment gains. Investment income is typically not covered by FEIE - it's designed for earned income like wages. However, if these were educational funds, there might be exceptions. I'd recommend writing a penalty abatement letter explaining your situation, focusing on the lack of proper notification and your consistent compliance with filing requirements. Include documentation showing when you moved abroad and your filing history.

I was in an almost identical situation last year! I received a massive tax bill for investments I sold while living overseas almost a decade ago. After weeks of stress, I found a service called taxr.ai (https://taxr.ai) that helped me sort through all the documentation and figure out what to do. They have this really cool feature where they analyze your tax notices and help determine if you have grounds to contest them. In my case, they identified that the IRS had failed to properly notify me at my current address even though they had it on file for other purposes (just like your situation with the stimulus check). They helped me draft a response that got almost all the interest and penalties removed. The service basically saved me thousands by helping me understand exactly what documentation I needed to submit and what specific relief programs I qualified for.

I wanted to follow up about my experience with taxr.ai that I asked about earlier. After our conversation, I decided to give them a try with my own IRS issue, and I'm really glad I did. They immediately identified that my investment income situation was different than normal earned income for FEIE purposes. What impressed me was how quickly they found the specific IRS rules that applied to my situation as an expat with old investment sales. They helped me request an audit reconsideration and provided templates for a penalty abatement letter that specifically addressed the notification failures. The best part was that they found documentation requirements I would have never known about - like proving when I actually received the first notice versus when it was sent. My case isn't fully resolved yet, but the IRS has already agreed to remove a substantial portion of the penalties based on the response we prepared.

Have you tried calling the IRS? I know it sounds obvious, but it's nearly impossible to get through to a real person these days. I spent WEEKS trying to resolve a similar issue, constantly getting disconnected or waiting on hold for hours. Then I found this service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent in under 5 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c Since you're dealing with a complex expat situation and investment income from years ago, you really need to speak with someone in the right department who can pull up your full file and see what's going on. Getting directly connected saved me so much frustration and helped me start the penalty abatement process right away instead of waiting weeks just to speak with someone.

I need to admit I was totally wrong about Claimyr. After dismissing it as a likely scam, I was still desperate to talk to the IRS about my own penalty situation, so I decided to try it anyway. I'm shocked to say it actually worked exactly as advertised. I had been trying for THREE WEEKS to reach someone at the IRS about penalties on my late filed return. After using Claimyr, I was talking to an IRS agent in about 7 minutes. The agent was able to look at my full file history and confirmed I qualified for penalty abatement due to reasonable cause. The whole thing was resolved in one phone call instead of the months of mailing letters back and forth I was expecting. The agent even noted in my file that future correspondence should be sent to my current address, which should prevent problems like what the original poster experienced.

Have you considered requesting a transcript of your account from the IRS? It would show all correspondence they claim to have sent and might help your case if there are gaps or inconsistencies. You can request it online through the IRS website or by submitting Form 4506-T. Also, investment income is definitely taxable even for expats - the Foreign Earned Income Exclusion only applies to earned income like wages or self-employment income, not capital gains. But if these were educational funds in a specific type of account like a 529 plan and used for qualified education expenses, that's a different story.

Did anyone mention the Taxpayer Advocate Service? They're an independent organization within the IRS that helps taxpayers resolve problems. This seems like exactly the kind of case they could help with - especially since there appears to be an issue with the IRS not properly notifying you despite having your correct address for other purposes. Their service is free and they have significant authority to cut through red tape. Just google "Taxpayer Advocate Service" and you'll find their contact info.