# The IRS is being very unreasonable



## LadyBri

On Thursday, April 11th, after coming home from work, much to my dismay the IRS had sent me a questionaire dated March 15th demanding that I answer the letter within 30 days of the date of this letter. This is already an unreasonable demand because it leaves me only a few days with which to reply to it and risk violating the 30 day deadline. Nevermind that it takes several days to fly over an ocean to reach Austin, Texas.

I quickly went to the post office the next morning (taking holiday time off work to do this) and spent £53 on global express postage to get my letter sent asap. Five days later, again much to my dismay, the letter was returned to me due to some bizarre clerical error in the postal world. I quickly shipped it out again yesterday afternoon using the regular air mail tracked and signed service which cost me an additional £7. 

Has anyone encountered this sort of thing before? Does the IRS still fine a person even if it is clearly an unreasonable demand?

All they wanted to know was if I was exempt from paying for 100% health insurance coverage, which of course I *am* and which I clearly indicated on my income tax forms when I mailed them out in January. 

I am feeling extremely stressed out over this and anxious.


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## Bevdeforges

I wouldn't worry too much about it. Your initial mailing may have been returned to you if you sent it to one of the PO Box addresses the IRS maintains. Most express delivery services cannot deliver to PO Boxes.

When you get something like that, you fill it out and mail it back, regular post. Good faith effort is all that is required. And there is always the possibility that sending the letter to you was a simple mistake. (The overseas address should have clued them on the fact that you are exempt from the health care thing - besides, they recently dropped the penalty anyhow so the net result even if you weren't exempt was $0.)


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## LadyBri

Thank you so much Bevdeforges! You've set my mind at rest! I could have sworn I read it on my income tax form that they'd dropped the penalty for health insurance coverage.


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## Moulard

They may have dropped the penalty, but they did not drop the requirement to declare coverage or exemption.


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## Bevdeforges

Moulard said:


> They may have dropped the penalty, but they did not drop the requirement to declare coverage or exemption.


This year, however, declaring your exemption consists of merely checking the box at the top of the first page of the 1040 form. They may have sent out letters automatically to anyone who neglected to tick the little box (or anyone who didn't notice the little box).


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## LadyBri

Bevdeforges said:


> This year, however, declaring your exemption consists of merely checking the box at the top of the first page of the 1040 form. They may have sent out letters automatically to anyone who neglected to tick the little box (or anyone who didn't notice the little box).


I *did* take note of and tick the little box that clearly states that I am exempt from health insurance coverage. They sent me the letter *anyway*. Obviously the IRS employs some very incompetent personnel. *rolls eyes*


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## Bevdeforges

LadyBri said:


> I *did* take note of and tick the little box that clearly states that I am exempt from health insurance coverage. They sent me the letter *anyway*. Obviously the IRS employs some very incompetent personnel. *rolls eyes*


Not sure if it's incompetent people or seriously ratty computer systems. The IRS is known to still be running on systems last updated in the late 1980s or early 1990s or so. I know the reputation they have always had back in the States (i.e. "not good") but when they had the IRS office in France, the folks staffing that office (all 4 or 5 of them) were actually pretty helpful and easy to deal with. Still, that was a long, long time ago in a galaxy far, far away.


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## underation

Bevdeforges said:


> Not sure if it's incompetent people or seriously ratty computer systems. The IRS is known to still be running on systems last updated in the late 1980s or early 1990s or so. I know the reputation they have always had back in the States (i.e. "not good") but when they had the IRS office in France, the folks staffing that office (all 4 or 5 of them) were actually pretty helpful and easy to deal with. Still, that was a long, long time ago in a galaxy far, far away.


Though some (not all) US consulates have IRS attachés, apparently.


> ‘Many people are confused by ... [FATCA],' admits Heather Van de Velde, the IRS attaché at the [Dutch] US consulate.


.https://www.dutchnews.nl/features/2...friendship-day-but-have-you-filed-your-taxes/

I do hope all US-born Dutch residents confused by FATCA will contact Ms Van de Velde and explain in great detail the problems FATCA is causing them. Details in the State Department telephone directory.


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## Bevdeforges

underation said:


> Though some (not all) US consulates have IRS attachés, apparently.
> .https://www.dutchnews.nl/features/2...friendship-day-but-have-you-filed-your-taxes/
> 
> I do hope all US-born Dutch residents confused by FATCA will contact Ms Van de Velde and explain in great detail the problems FATCA is causing them. Details in the State Department telephone directory.


I suspect the title of "IRS attaché" is probably one of several heaped on one, poor sucker working at the consulate. The Paris consulate used to have an IRS office (one of only 5, I think it was, around the world), but now pretty much refers folks to the IRS website.

The State Department folks (i.e. those working at the consulates) are well aware of the hassles of FATCA. Even the IRS Taxpayer Advocate has issued a couple of reports explaining the problems FATCA causes regular everyday taxpayers and has even issued specific proposals for changes that need to be made (the usual one being exempting financial accounts held in the taxpayer's country of residence on the theory that those are subject to taxation and regulation by the country of residence). Problem is that no one in Congress is interested in the issue.


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## underation

Bevdeforges said:


> I suspect the title of "IRS attaché" is probably one of several heaped on one, poor sucker working at the consulate.


That seems very likely. The more work and trouble FATCA causes for IRS employees, the better, IMO. 



> The State Department folks (i.e. those working at the consulates) are well aware of the hassles of FATCA. Even the IRS Taxpayer Advocate has issued a couple of reports explaining the problems FATCA causes regular everyday taxpayers and has even issued specific proposals for changes that need to be made (the usual one being exempting financial accounts held in the taxpayer's country of residence on the theory that those are subject to taxation and regulation by the country of residence). Problem is that no one in Congress is interested in the issue.


The (perhaps-unenforceable) gross-proceeds-withholding threat has been lifted, for countries with Model 1 IGAs, and the "passthrough"-withholding threat has been suspended. The unenforceable requirement for banks to somehow obtain the accountholder's TIN has also been suspended and the suspension seems (to me) likely to be made permanent. 

These changes have come about without any help from the US Congress. The IRS does seem to have considerable power to make it easier for banks to quietly go back to accepting US-born individuals as customers. Or so it seems to me. 

Worth being a thorn in their flesh, even if it seems insignificant. It all can add up to low morale and in-house grievance.


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## LadyBri

Bevdeforges said:


> I wouldn't worry too much about it. Your initial mailing may have been returned to you if you sent it to one of the PO Box addresses the IRS maintains. Most express delivery services cannot deliver to PO Boxes.
> 
> When you get something like that, you fill it out and mail it back, regular post. Good faith effort is all that is required. And there is always the possibility that sending the letter to you was a simple mistake. (The overseas address should have clued them on the fact that you are exempt from the health care thing - besides, they recently dropped the penalty anyhow so the net result even if you weren't exempt was $0.)


I'VE BEEN CHARGED $770.43 BY THE IRS FOR NOT HAVING HEALTH INSURANCE COVERAGE FOR THE YEAR OF 2018!!!!!!!!!!!!:mad2:

What do I do???!!!! Please help! They say that if I don't pay the balance in full they will start charging interest! This can't be RIGHT! I haven't lived in the U.S. for over five years! Why am I being charged unfairly for health insurance I never needed?


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## underation

Sounds like 30 days after the automated system mistakenly sent you the warning, it followed up automatically with a second-level warning. Apparently your response correcting the mistake has not yet been received, or if received hasn’t been acted upon.

Wait and see what happens next, would be my advice.


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## Bevdeforges

Or, check with the Taxpayer Advocate Services: https://taxpayeradvocate.irs.gov/ne...to-do-with-it?category=Tax News&taxissue=1217


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## LadyBri

Bevdeforges said:


> Or, check with the Taxpayer Advocate Services: https://taxpayeradvocate.irs.gov/ne...to-do-with-it?category=Tax News&taxissue=1217


Thank you. I will check immediately. I plan to call the IRS later on today to see if I can sort it out, but you know what they're like . . . the IRS is not unlike the mob.


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## Bevdeforges

LadyBri said:


> Thank you. I will check immediately. I plan to call the IRS later on today to see if I can sort it out, but you know what they're like . . . the IRS is not unlike the mob.


That's precisely why they have the Taxpayer Advocate Service. Haven't had occasion to use the IRS one, but I had to deal with the California Taxpayer Advocate several years back (and California has a reputation as a difficult state for tax matters), and got excellent assistance to resolve the problem.


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## underation

LadyBri said:


> . . . the IRS is not unlike the mob.


From what I’ve heard, dealing with the IRS from outside America is more like dealing with the world’s worst Customer Service helpline.

Poorly trained, indifferent, aiming above all to *avoid* transferring you to anyone who might be able (and therefore required) to help.

Not actually able to steal your money, shoot you, or leave a horse’s head under your duvet.


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## LadyBri

*Going on a bit of a rant, forgive me.*

I just wish I could tell the press about this so that people can be informed how the U.S. government REALLY treats its citizens! Extortion, exploitation, usury, unfair taxation--I thought the so-called founding fathers left England in the first place to get away from being treated unfairly! This is a direct violation of my rights as a U.S. citizen because the IRS has violated the 8th Amendment, which states, "Excessive bail shall not be required, nor excessive FINES imposed, nor cruel and unusual punishments inflicted." Yes, I do call this a CRUEL and UNUSUAL PUNISHMENT to fine me for health insurance when I clearly do not LIVE in that country and already have health insurance that is kindly provided FREE OF CHARGE by the United Kingdom who has treated me with the utmost respect, decorum, honour, courtesy, kindness, and the liberty and justice I was NOT endowed with when I lived in the United States. 

They are a country who began with very high ideals and have fallen miserably short of those ideals ever since the Enlightenment era! I'm just glad my dad's not here to see what the government he fought for and eventually DIED for last year (yes, his cancer was directly caused by the Agent Orange and other chemicals he was exposed to during the Vietnam War which was proved and legally established), is doing to his youngest daughter. He would be outraged and ashamed of his country!


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## underation

Deepest sympathy for your father’s suffering inflicted by that terrible terrible war, and for your loss.

The US legal system, including taxation, is very different from the UK system, but the rights aren’t that different. You’re presumably paying for your use of the NHS - through National Insurance, or through the applicable surcharge. But I agree the UK system is much more capable of treating its population as human beings rather than as potential criminals and trying to terrorise them into obedience regardless of right and wrong.. There was a very interesting discussion of the difference between US and UK legal systems, in the most recent Reith lectures on Radio 4. Jonathan Sumption. Well worth a listen.

I left America long ago (during that terrible war), metaphorically slamming the door behind me, and had very little to do with America or Americans during the decades following - until FATCA came along and a snotty teenaged bank clerk refused to open a bank account for me. 

The FATCA fiasco, and renouncing US citizenship, has lifted my ancient fear of the US. There are good things, and of course many good people, as well as some terrible things and some stupid, stupid laws.

I’m very glad to have lived my life in England.


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## LadyBri

Thank you for that Underation. *hugs* And thank you for your kind condolences. The anniversary of his passing was just last week and I'm still feeling very heart broken and bereft. 

You are right of course that there are good things and good people in the U.S. as well as the bad and the stupid. I am glad you lived your life in England. I tell you it has been the best move of my life on so many levels and for so many good reasons. I'm happy here. I have my true love, the house of my dreams, and an excellent job that challenges me as well as puts food on the table, not to mention a community I feel a part of, friendly neighbours, and the best friends I've ever made.

I shall certainly give the Reith lectures a listen! Thank you very much for your reply.


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## Bevdeforges

Let me just throw in a bit of perspective here. The IRS Taxpayer Advocate program has been extremely supportive of US citizens living overseas. They have submitted reports to both the IRS and Congress outlining the confusion and the unintended consequences of much of the tax legislation (FATCA, FBAR, FEIE, Foreign Tax Credit). And on their website, they publish accounts of some of the cases where they have been able to obtain justice for the taxpayer.

Another option is to join forces with one of the expat advocacy groups. AARO is one, but the ACA (American Citizens Abroad) tends to be a bit more militant on tax and other issues.


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## underation

Bevdeforges said:


> ...unintended consequences of much of the tax legislation..


A few comments from a UK-resident perspective.

FATCA: For US citizens living in the UK, it’s not the US FATCA legislation that causes problems; it’s the UK’s implementation of the US-UK IGA, which allows banks to abuse the data protection rights of US-born UK residents.

FBAR: Worth UK residents being aware that FBAR is not covered by the US-UK tax treaty (not being tax law), and FBAR penalties are not enforceable outside the US.

FEIE: Are difficulties caused for UK residents by the US Foreign Earned Income Exclusion?

Foreign Tax Credit: Foreign Tax Credits aren’t caused by US legislation and as far as I’m aware are a UK-resident taxpayer’s right, when tax has been correctly paid to the country which under the treaty has the right to tax the income for which credit is being claimed.

One country taxes - the other country allows credit. To do otherwise would result in double taxation, and the taxpayer would be able to raise an objection under the MAP procedures.


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## Bevdeforges

FATCA and FBAR cause problems for US citizens living in many countries other than the UK, and these two sets of rules were causing problems before the IGAs started coming into being.

The FEIE again affects lots more than just UK residents. Especially when every few years Congress gets a notion on to repeal Section 911 of the Tax Code (ironically numbered, no?) which includes the FEIE. Talk to US citizens working in the Gulf States or those who work in International civil service agencies, where the state of residence exempts those agencies from personal income taxes.

FTC is also, I'm afraid, legislated and available to both overseas and US residents. Basically has nothing to do with tax treaties.

It's really not just about UK residents. In fact, in some ways, the UK residents have advantages when it comes to how the US-UK tax treaty works.


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## underation

Bevdeforges said:


> FATCA and FBAR cause problems for US citizens living in many countries other than the UK, and these two sets of rules were causing problems before the IGAs started coming into being.


The OP is resident in the UK, as am I. That’s why I’m commenting from a UK-resident perspective.

Until HMG signed the IGA, UK residents with a US birthplace had normal data protection rights, the same as UK residents born elsewhere.



> The FEIE again affects lots more than just UK residents. Especially when every few years Congress gets a notion on to repeal Section 911 of the Tax Code (ironically numbered, no?) which includes the FEIE.


That surely means the Foreign Earned Income Exclusion is felt by US expats to be a benefit, not a problem. _Repealing_ the legislation would be felt as a problem - yes?



> FTC is also, I'm afraid, legislated and available to both overseas and US residents. Basically has nothing to do with tax treaties.


It certainly has to do with the US-UK tax treaty, given that it’s the mechanism whereby the treaty serves one of its two stated purposes (avoidance of double taxation.)

One of the articles which is _not_ subject to the saving clause.



> It's really not just about UK residents.


For UK residents it is. The OP is a UK resident and so am I, consequently I’m commenting from a UK-resident perspective - as stated.


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## Nononymous

Unless there is some compelling reason to do so, life is so much simpler for US citizens if they cease (or never begin) filing US taxes when living permanently outside the country.


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## underation

Nononymous said:


> Unless there is some compelling reason to do so, life is so much simpler for US citizens if they cease (or never begin) filing US taxes when living permanently outside the country.


Indeed.


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## Bevdeforges

If you're going to get down to that, then as a French resident and citizen, the UK point of view is basically not of any interest to me. 

The US taxation system is a global problem that US "overseas residents" all have to deal with in some manner. That's one reason why the US Expat groups tend to work on the issue as a whole rather than just from the point of view of one country or another.



> That surely means the Foreign Earned Income Exclusion is felt by US expats to be a benefit, not a problem. Repealing the legislation would be felt as a problem - yes?


The repeal of the FEIE would certainly be a problem for many. However, those who take the FEIE have to give up a number of other tax "benefits" (some might call "loopholes") that are available to US resident taxpayers. This is not the time nor the place to go into the details, but they can be significant depending on the circumstances and the plans of the overseas resident regarding eventual repatriation.

And while the FTC is the mechanism spelled out in the various tax treaties, it is highly imperfect in its application to overseas residents when it comes to "avoiding double taxation" - especially in those countries with low tax rates (or no income taxes), or in those countries where there are "tax free" savings plans or investments or tax-favored retirement investments (which are not recognized at all by the US). 

You may want to take a look at the American Citizens Abroad website. https://www.americansabroad.org/ They have quite a bit of information about various concerns of US expats including taxation, Medicare, Social Security and advocacy efforts.


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## underation

Bevdeforges said:


> If you're going to get down to that, then as a French resident and citizen, the UK point of view is basically not of any interest to me.


Understandably. But it _is_ highly relevant for UK residents.



> The US taxation system is a global problem that US "overseas residents" all have to deal with in some manner. That's one reason why the US Expat groups tend to work on the issue as a whole rather than just from the point of view of one country or another.


I would suggest that for those in treaty countries who are filing US tax returns, or wondering whether they need to file US tax returns, it’s quite important to read their residence country’s tax treaty with the US quite carefully. 

When advocating for a change to US tax laws, .then, I agree, it’s no doubt more effective to take a united front, since the US legislation is the same for all



> The repeal of the FEIE would certainly be a problem for many. However, those who take the FEIE have to give up a number of other tax "benefits" (some might call "loopholes") that are available to US resident taxpayers. This is not the time nor the place to go into the details, but they can be significant depending on the circumstances and the plans of the overseas resident regarding eventual repatriation.


I see. Thanks for the clarification.



> And while the FTC is the mechanism spelled out in the various tax treaties, it is highly imperfect in its application to overseas residents when it comes to "avoiding double taxation" - especially in those countries with low tax rates (or no income taxes)


Speaking from a UK perspective: credit is only available for foreign tax actually paid. I know it feels unfair to a USC UK resident who sells their home, that the treaty allows the US to tax it; the solution is not to invoke the treaty by reporting the gain on the sale to the US as US-taxable income.

I sold properties repeatedly over the years I lived in the UK as a US citizen. It was never necessary for me to pay US tax, since I never reported the transactions to the IRS as US-taxable. I didn’t break any laws. None of my income, including the gain on the sale of property and interest on tax-free savings accounts, was US-taxable, and I never turned it into US-taxable income by reporting it to the US as US-taxable.

Filing US tax returns may be necessary or advantageous, depending on circumstances ; if not, it’s much better not to file. IMO.


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## Bevdeforges

Your interpretation of US tax law is "interesting" to say the least. However it is distinctly at odds with the US IRS interpretation of what is or is not reportable.

I'll agree with you (and with Nononymous) that if you can do it, it's best simply not to file at all. But the reasons that some of us feel it "best" to file are many and varied, as are the variations of precisely how each individual "overseas resident" chooses to file in keeping with their own situation, conscience and assessment of the risks they may or may not be facing.


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## underation

Bevdeforges said:


> Your interpretation of US tax law is "interesting" to say the least. However it is distinctly at odds with the US IRS interpretation of what is or is not reportable.


Actually, the IRS has never disagreed with me, nor complained at me, nor raised any issues with HMRC. 

When I have time I’ll post some further comments regarding the US-UK treaty, and when/whether UK residents might or might not find it helpful to invoke it - purely for UK residents who wish to read it.



> I'll agree with you (and with Nononymous) that if you can do it, it's best simply not to file at all. But the reasons that some of us feel it "best" to file are many and varied...


No doubt. It’s up to each individual to decide how to handle their tax affairs.



> ...as are the variations of precisely how each individual "overseas resident" chooses to file in keeping with their own situation, conscience and assessment of the risks they may or may not be facing.


Conscience? Conscience doesn’t come into it, for taxpayers who are paying tax to the country that has the taxing rights and not committing tax evasion. Which I, for one, have always done, without fail - and confirmed the same to the IRS, following renunciation, under penalty of perjury.


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## Bevdeforges

underation said:


> Actually, the IRS has never disagreed with me, nor complained at me, nor raised any issues with HMRC.


And I have never had any complaints, nor even any correspondence from the IRS even regarding some "aggressive" tax positions I have taken over the years. If you make it clear on your returns that the potential recovery is peanuts, they just won't bother. 



> Conscience? Conscience doesn’t come into it, for taxpayers who are paying tax to the country that has the taxing rights and not committing tax evasion. Which I, for one, have always done, without fail - and confirmed the same to the IRS, following renunciation, under penalty of perjury.


Oh but conscience is everything. There is no such thing as a perfectly compliant tax returns - simply given the wide range of interpretations of various aspects of the tax law and regulations. Basically you file (or not) according to what lets you sleep at night.


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## underation

Bevdeforges said:


> And I have never had any complaints, nor even any correspondence from the IRS even regarding some "aggressive" tax positions I have taken over the years. If you make it clear on your returns that the potential recovery is peanuts, they just won't bother.


They have no grounds to bother, if the person has never filed and they have no evidence of tax evasion. That’s why they don’t bother. 



> Oh but conscience is everything. There is no such thing as a perfectly compliant tax returns - simply given the wide range of interpretations of various aspects of the tax law and regulations.


Virtue signalling. 

Comply with the law of the land you live in (including the treaties) and you’ll be fine.


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## NatGold

LadyBri said:


> I *did* take note of and tick the little box that clearly states that I am exempt from health insurance coverage. They sent me the letter *anyway*. Obviously the IRS employs some very incompetent personnel. *rolls eyes*



Just file Form 8965 with Exemption Type "C" for the Full Year. That will surely get them off your back.


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## LadyBri

NatGold said:


> Just file Form 8965 with Exemption Type "C" for the Full Year. That will surely get them off your back.


My husband said it was because I filed form 8965 that I'm in this fix. It made them think I wasn't exempt . . . so I'm trying to get in contact with TAS now, and I plan to file form 1040X - I believe this is the correct form to correct a mistake.
https://www.irs.gov/pub/irs-pdf/f1040x.pdf


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## NatGold

LadyBri said:


> My husband said it was because I filed form 8965 that I'm in this fix. It made them think I wasn't exempt . . . so I'm trying to get in contact with TAS now, and I plan to file form 1040X - I believe this is the correct form to correct a mistake.


Did you file Form 8965 with the "C" exemption code for the full year? I don't see why filing form 8965 correctly would trigger this at all. 

If they sent you a letter, you should be able to just reply directly with the IRS notice attached.
Perhaps give them a call here: +1 267-941-1000 for international callers or overseas taxpayers. 

Option 1, 4, 2 to talk about your specific account and they can let you know the proper next steps 

Good luck!


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