2014 US tax penalty

Happy Halloween everyone!

So...I'm not sure what has happened, but today I received a very odd letter from the IRS saying I failed to file my 2014 taxes on time (not true - I sent them on 15 April 2015, which is actually early since I live and work abroad) and that I owe over $100 in taxes because I mis-calculated the standard deduction by $150 (also...as far as I can tell...not true). They've also assessed a penalty of the same amount (over $100), as well as interest for more than a year. The letter says I have to pay or contact them by 25 October or face more penalties.

I've always done my own taxes and never had anything like this happen before. I'm feeling both surprised and annoyed. I guess I need to contact them even if it's after the official deadline, but does anyone have any advice about what I should say? What kind of evidence do I need to prove they've made an error?

Thanks in advance for any suggestions!

Are you sure this letter is actually from the IRS?  Something strikes me as a bit fishy about it...

... but I'm absolutely not a US tax expert, so hopefully someone else will be along to give more concrete advice.

Hmm...it certainly looks official. I'd say I'm 90% sure it's genuine. If not, then it's even more odd, because they know my AGI from last year (which matches what I sent to the IRS in April).

Since you believe that you are correct on both counts (not late and correct standard deduction) then I would definitely contact them otherwise you may get it wrong in future years.

How can you calculate a standard deduction incorrectly......there isn't really any calculating to be done.

Under what status did you file and what standard deduction did you claim?

The short time to comply is s bit suspicious.

Thanks for your replies. The letter was dated 5 October but it only reached me today. It looks like it was sent second class once it arrived in the UK.

But yes, it's very confusing how they could have come to the conclusion I was off by $150 on the standard deduction. I subtracted all of the numbers correctly, as far as I can tell. They're not disputing my AGI - which would make a bit more sense if they thought my (tiny) UK self-employment income was calculated wrong, for example, or that my calculation of the exchange rate was fishy.

I'm doing married filing separately to keep my (British) other half away from the IRS's clutches. I claimed $6,200 standard deduction and $3,950 for the exemption. (I earn far less than $150,000 per year, so I assume that's correct?) I used the foreign tax credit so if I'd actually owed more US tax I'd have just used more of my UK tax paid to off-set it.

The really puzzling thing is how they think I should have filed for 2014 more than a year ago (interest charges start on 15 August 2014, but everything clearly says that my mistake was with my 2014 tax return). Am I going crazy here, or do you think it's a mix-up on their side?

Your deduction and exemption look correct unless your income was greater than 254,000 after which the exemption begins to phase out.

I think that interest on under payment of taxes begins at the point during the tax year may begin when the underpayment is deemed to have happened, not when taxes are filed whichis usually several months after the tax year ends.

The IRS computer will sometimes disallow the personal exemption if the name and US SSN on the return do not match the name recorded with the SSA.  Did you file using the correct name that matches the SSA details?

Are they asking for self-employment tax possibly?

Thanks for your help in trying to get to the bottom of this.

All the letter says is that they think I calculated my taxable income incorrectly because I either didn't choose the standard deduction or else I chose the wrong one based on my filing status. They've therefore changed Line 44.

Below that, it has a table.
AGI:
Your calculation: $XX,XXX
IRS calculation: $XX,XXX (the same number)

Taxable income:
Your calculation: $YY,YYY
IRS calculation: $YY,YYY+150

I have an exemptions statement from HMRC because my self-employment (and all other earnings) is all based in the UK. The self-employment income bit is calculated before the AGI, right? And they didn't mention what type of tax was wrong; just that the standard deduction i chose was incorrect somehow.

I didn't change my name when I married and it's not the first year I filed MFS.

This is all very confusing...

Re-check your original arithmetic - did the numbers on your original return add up?

Did you attach the certificate of coverage to the return?

Just some ideas...

If in doubt, phone the IRS and someone there can explain any issues.

I've re-checked my figures and it all adds/subtracts correctly. I did attach the UK Certificate of Coverage, although it does say my UK self-employment started in 2013. (Do I need to have a new one each year...perhaps that's the issue?)

I guess I'll have to make a phone call to the IRS when they open tomorrow morning. Hopefully they'll be able to tell me what happened and/or how they came up with their mysterious re-calculation. I'm a bit worried that I'll say something stupid and make everything worse, even though I haven't actually done anything wrong...fingers crossed they'll realise it was their mistake and I'll be in the clear. I'll let you know what happens.

Although your AGI matches that of the IRS there are a number of other calculations after that line other than the deductions and exemptions.  For example I have qualified dividend and capital gains which are taxed differently and uses a 27 line complicated worksheet for this particular calculation since some is taxed at 0% and some at 15%. (FYI, I use TurboTax to file my taxes).

I would definitely contact the IRS since you don't understand what, in their opinion, you have done wrong, and if you do let us know the outcome I'm sure we'll be a little bit wiser.

I know what you mean, durhamlad, and my self-employment 'Exempt statement' does come after the AGI calculation, but it's still quite odd that they wrote that it's the Standard deduction that should be different from my calculation (by the random amount of $150). Especially since I've done the Foreign Tax Credit successfully since 2009 and the UK self-employment earnings in 2013 without any issue. We'll see what the IRS says tomorrow.

I know what you mean, durhamlad, and my self-employment 'Exempt statement' does come after the AGI calculation, but it's still quite odd that they wrote that it's the Standard deduction that should be different from my calculation (by the random amount of $150). Especially since I've done the Foreign Tax Credit successfully since 2009 and the UK self-employment earnings in 2013 without any issue. We'll see what the IRS says tomorrow.

Their explanation of a Standard Deduction discrepancy is just weird so I'll be interested in hearing what the real reason is.

Good luck tomorrow with your call to them.

Thanks! I'll definitely let you know what they have to say.