# In a panic here, miscalculations



## Transplant_DK (Jan 27, 2012)

I took advantages of the tax amnesty program to try to get in the good after not filing for many years. So far so good, I got everything sent in last fall (September/October). I didn't hear back, which I heard is a good sign. 

Yesterday, I received 2 letters from the IRS saying I miscalculated and I owe somewhere around $13,000 total for the 2 years. Of course something about the 3rd year (2009) could also come in the mail today. 

Apparently I have 4 days to make payment arrangements, but it does look like I can call and dispute the amounts and gain 60 days. 

My taxes are complicated to the point that I earn over the FEI exemption and have a small amount of US income (sold some stocks, but I sold them for less than they were worth when I inherited them plus I have a tiny bit of interest paid on other stocks, but less than $300 annually). Given the tax rate in Denmark, it is hard for me to believe I should owe anything at all, so I'm assuming I've miscalculated. 

The question is what to do now: I don't know if I will be able to figure out what I did wrong, as I really researched and did my best when filing in the fall. Should I find a CPA? I've heard horror stories of Americans using Danish accountants, so it would mean finding someone in the US. How do I do that? 

Any suggestions would be greatly appreciated.


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## Bevdeforges (Nov 16, 2007)

You may want to check the website of the US Consulate in Paris. There is an IRS office there, and they have quite a bit of information about taxes, as well as lists of Attorneys (including tax attorneys) and Accountants in France. It may well be possible to work with someone in Paris via e-mail to try and get your situation sorted out.

Resources for US Citizens | Embassy of the United States Paris, France (Check the lists for Attorneys and also the one for Tax Accountants)

U.S. Taxes (IRS) | Embassy of the United States Paris, France
Cheers,
Bev


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## graubart (Jun 4, 2012)

Have you tried tax software. It should give you an indication if you have done something wrong.


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## Transplant_DK (Jan 27, 2012)

Just now able to get back to this. I think my problem is how I figured my foreign tax credit. What I did was subtract the amount that was not excluded in the F2555 (in other words, the amount over the foreign earned income credit) and then calculated that in USD for April 15 of the filing year. Then, I wrote down how much Danish taxes I paid (total) and calculated the percentage of tax paid. I then multiplied that figure (33%) by the amount not excluded and came up with a total tax paid in USD. I think that is where the mistake is--I should maybe have just deducted the entire amount of tax paid (and not a percentage)? In this case, I'm assuming I'd come up with a negative number, which I thought I should avoid. 

Can anyone help me with the final step on the F1116? 

I'm going to try to reach the US tax service in London, but my schedule doesn't fit with theirs until next week and I'd really like to get this monkey off my back.


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## Bevdeforges (Nov 16, 2007)

Technically speaking, I believe you are not supposed to deduct any tax on the income excluded on form 2555 as a tax credit on form 1116. But I am not sure of the mechanics of calculating exactly what it is you are allowed to deduct.

Try going through the instructions to form 1116 line by line and very literally. Sometimes that is the only approach. (But don't worry if the result is a negative number - that's actually pretty much what you want.)
Cheers,
Bev


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## santafe (Sep 10, 2012)

You should not get a negative number. The 1116 form only allows to deduct the amount of foreign tax that would allowed for tax purposes if that income was earnt in the USA. I agree if the tax rate is higher in Denmark than the USA you should not owe tax to the USA unless you have any US source income. Are you using tax software? Is it AMT Form 6251 that is giving you a tax liability? AMT can be tricky and you might need to prepare a second 1116 for AMT.
Did the letter from the letter from the IRS tell you where you had made the error?

You could also try just completing a 1116 for all you earned income and not use the 2555 at all. If you have unearned income you need a second 1116 for passive category income.


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## graubart (Jun 4, 2012)

No one can explain 1116. Why take a chance, buy the software and let it do the form for you. Turbotax does 1116 and AMT-1116 forms. Possibly all tax software will do it.


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