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(I have another question related to my situation but since it was getting too long, I am breaking down my questions so it will be manageable.)

The IRS recently reclassified my reported income of tax year 2019 as unearned income. Attached is form form 886-Aform 886-A. The IRS included another form 12203 Request for Appeals.form 12203

It is a month after the last date to respond date but I received it late due to a tenant who had it by them and I live and work abroad so things anyway take more time to get to me.

Would this form help me in getting someone to work this out with me? I am trying to avoid costly professional help and if someone at the IRS would work with me, I ought to be able to prove that the income is legitimately earned income.

Here is what the IRS wants now if I don't have a way to work it out with them.pg1 pg2

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  • Lol of course it's EITC, it's always EITC
    – littleadv
    Sep 28, 2022 at 8:49

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Can you submit? Absolutely.

Will the IRS "work with you"? They don't have to. Depends on what you write, and how you present it, and what claims you're making and how you are substantiate them.

Which is what the professionals are for.

Why are you trying to avoid a $1K expense on a professional when you're facing $12K tax liability?

Technically - you missed the deadline, the correct place to argue your case would be the Tax Court.

I'm also wondering how come you have earned income changed to unearned, but no changes in FEIE or FTC. Did you claim either? If not - how come?

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  • The tax software didn't say anything to me about FEIE or FTC. I am not sure what they are and how to claim them. Would claiming them help or make things more complicated? As far as saving 1k. I don't make so much per hour so I figure if I can do this, it's a better deal than paying it out. I had to work quite a lot of time to earn that 1k.
    – Mr Monee
    Sep 28, 2022 at 10:09
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    @MrMonee say what now? You are a US expat and you have never heard of Foreign Earned Income Exclusion or Foreign Tax Credit? No wonder you got flagged for audit... It may be that by paying the $1K to a CPA you will actually get back so much more because they'll be able to fix your very costly mistakes.
    – littleadv
    Sep 28, 2022 at 17:38
  • Do I need a CPA or Tax lawyer to get this sorted out now? Keep in mind that I do not know why they decided to consider my income unearned so I need a way to get them to understand that it's not correct, and the ensuing years reported income is earned as well or potentially they can keep doing this each year if they want. They just send me the accusation and don't answer the phone or fax so I have no way to present my side.
    – Mr Monee
    Sep 28, 2022 at 17:40
  • @MrMonee a CPA or a tax attorney or a EA. There are many firms in Israel that can do that, e.g.: cpa.co.il/us-taxation/bikoret_irs.html. As to why - it may be random, it may be the fact that you never claimed FEIE or FTC while claiming that you have foreign earned income, it may be because of EITC (it is a known audit trigger as there's a lot of fraud about it).
    – littleadv
    Sep 28, 2022 at 17:57

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