2014 US tax penalty

It seems I left it too late today and I can't get through, not even to the telephone queue. It says to either call back tomorrow or check the IRS website. Grrr. :-( I'll try again after dinner.

It seems I left it too late today and I can't get through, not even to the telephone queue. It says to either call back tomorrow or check the IRS website. Grrr. :-( I'll try again after dinner.

How frustrating, here's wishing you better luck next time 

Right. So, 45 minutes on hold and 30 minutes on the phone with the IRS has led to the following explanation: The IRS made an error when processing both my 2013 and 2014 tax returns (apparently the difference was so small in 2013 that they didn't bother to tell me...nice one...).

But also, in part, it's due to a decision I made in 2008 (since I believed I'd be living in the UK for the foreseeable future) to change my tax year from the US calendar year to match up with the UK tax year (6 April to 5 April).

So, the IRS processed my last two tax returns as if the information were nearly a year behind (e.g., for 2013 they were processing it as if I had included my income through 5 April 2013, even though I clearly wrote '5 April 2014' as the end date), and thus they decided that I should have used the standard deduction and exemption amount from the previous tax year. When she looked closely at the end date for my last tax return (5 April 2015 - which I managed to submit on 15 April because I was so amazingly organised this year! :-) ) she agreed that the standard deduction and exemption amounts looked correct for 2014. So I don't have to pay anything (at least not yet) until the two tax years in question have been fully reviewed in a month or so. At which point they'll hopefully realise their mistake. 

Not a fun phone call, but I'm happy to know that - assuming the powers that be agree with the agent I spoke to - it wasn't my ability to subtract that was incorrect! 

I didn't know you could change your US tax year..... I don't I want to try something like that, but it seems it could make things easier if the dates all lined up. This will be my first year doing both taxes...

Thank you so much for getting back to us on the details of the problem.  You would never have figured out the discrepancy without that phone call.

Like F4 I didn't realize that you could align the tax years like that.  Seeing the confusion it may cause then I think I will stick with the differing tax years when I move back next year.

Speaking as a professional, I have only once in the past 25 plus years seen ONE individual US return prepared using a fiscal year. It is extremely rare for an individual to meet the conditions required to elect for a fiscal year; but unfortunately once a fiscal year is elected it is impossible to change back to the calendar year.

The rules for a fiscal year taxpayer are fiendishly complex and - as I said - I have only ever seen one other client make this election, but it sounds as though perhaps the 2014 US return should have reported income that arose during the UK tax year ended 5 April 2014 and claimed credit for tax paid during that period?

It would make sense to review IRS instructions on the election - but as there are probably only a few hundred individuals who have made this election, it is probably going to need an IRS specialist to review the case as the IRS will only have handful of employees who have ever seen such a return.

Hmm. Maybe they allowed it because of my self-employment? Or (perhaps more likely) maybe they never noticed that I changed the dates until they saw it on my 2013 tax return. Whoever looks at those two years again may have to go back further if I'm not allowed to use a non-calendar tax year. I thought it was allowed (as long as I never tried to change it back to the calendar year) and that it would be easier for all involved since it'd match with my UK income and the IRS could compare figures with HMRC more easily. I hope they don't say I should go back to the calendar year...but I guess we'll see.

Once you have elected a fiscal year on the first US return you ever file, you can never return to the calendar year. You may want a lawyer to advise you if you had filed using a non-permissible year.

Hi guya, I know that it's not possible to change my US tax year back to the calendar year now that I've elected to change it, but again, as long as I'm going to be living in the UK (possibly forever now that I have ILR) I think it's easier/better to keep it in line with the UK one. If the IRS says that it's not permissable for some reason then I guess they'll make me re-do my old tax returns to match back up with the calendar year? Or is that why I need a lawyer, because they won't allow me to fix my past returns if they aren't happy with what I did? Publication 538 says: 'Generally, individuals must adopt the calendar year as their tax year. An individual can adopt a fiscal year provided that the individual maintains his or her books and records on the basis of the adopted fiscal year.' Which I do. So as far as I can tell, even if it's very unusual, what I elected to do wasn't actually illegal...or am I wrong?