Thanks for the tip about the state refund! I didn't even think about that. I'm expecting about $700 back from my state, so that would definitely help reduce what I need to finance. Based on everyone's advice, I think I'll make a payment now of whatever I can afford and then set up a short-term payment plan. Seems like the consensus is not to wait until April 15th!

You're welcome! Yes, using your state refund toward your federal tax debt is a smart move. And definitely don't wait until April - not only will the phone lines be jammed, but you'll be accruing interest on the full amount in the meantime. One more tip: if you set up a payment plan but then find you can pay it off faster than expected, there's no penalty for paying early. I ended up getting a small bonus at work and was able to clear my tax debt in 3 months instead of the 6 I had planned for.

Offers in Compromise are pretty hard to get approved. The IRS only accepts them if they genuinely believe they cannot collect the full amount from you either now or in the foreseeable future. You have to provide extensive documentation of your assets, income, expenses, etc. For a tax debt of $7,420 like the OP has, it's unlikely to be worth pursuing unless they're facing severe financial hardship. The application fee alone is $205 (though it can be waived for low-income taxpayers), and you have to submit a significant payment with your offer.

In my 401k I've been using a treasury fund for cash parking and it's currently yielding about 3.8% which beats most stable value funds I've seen. The advantage of treasuries in the current environment is they respond faster to rate changes. The downside is there can be some minor NAV fluctuation vs stable value funds which maintain stable principal.

Thanks for that insight! Do you see much day-to-day fluctuation in the NAV with your treasury fund? I'm pretty conservative with this portion of my savings so stability is important, but that extra 0.7% yield is pretty significant too. I'm guessing the stable value fund will eventually catch up to current rates, but seems like they lag quite a bit based on what you're saying.

Money market funds are solid for cash parking in retirement accounts. The 4.2% yield is quite good actually. The main thing to check is the expense ratio - some 401k plans offer money market funds with ridiculous fees that eat into that headline yield. Also, if you don't mind sharing, which fund is offering 4.2%? Most I've seen are in the 3.5-3.8% range.

I've heard of FreeTaxUSA but was worried about switching since I've used TurboTax for years. Does it handle importing 1099-B forms from Wealthfront or would I have to enter all those transactions manually? And is it actually reliable/secure? TurboTax's upselling is driving me nuts but I'm nervous about trying something new.

FreeTaxUSA doesn't have direct import from brokerages like Wealthfront, so you'd need to enter the transactions manually. However, if you don't have tons of transactions, it's not too bad - just time-consuming. The software is completely legitimate and secure - I've used it for three years now with no issues. It's actually owned by TaxHawk, which has been around for 20+ years. The interface isn't as pretty as TurboTax, but it's much more straightforward and has all the same features without the constant upselling. For Schedule D specifically, it's included in their base price (around $15 for federal filing) instead of requiring an expensive upgrade.

TurboTax is looking at the detailed transaction section, not just the summary fields. Even if the summary shows zeros, each individual buy/sell transaction needs to be reported on Schedule D. The summary fields OP mentioned (lines 8-11) are actually for futures/derivatives contracts, not regular stock transactions.

Do you meet with your CPA throughout the year or just at tax time? I'm wondering if there's value in quarterly check-ins or something.

I do both - a main consultation during tax prep season but also a mid-year check-in around June/July to make sure I'm on track with estimated payments and to discuss any new business developments or investments. The mid-year meeting is actually incredibly valuable because it gives me time to implement tax-saving strategies BEFORE year-end when many opportunities disappear. For example, last July we identified that I could purchase some needed business equipment before December and fully deduct it, saving me about $1,400 in taxes. Waiting until tax season in April would have been too late.

What kinds of deductions did you miss? I'm curious because I'm in a similar situation and wondering if I'm leaving money on the table.

That's really helpful! The 2020 debt was actually from when we were already married and filing jointly, so I'm not sure if this would apply to us. But is there any similar form for requesting the bypass refund that others mentioned?

Unfortunately, there isn't a standard form for requesting an offset bypass refund. That's handled through direct communication with the IRS, usually by phone. Since you were already married and filing jointly for the 2020 debt, the injured spouse relief wouldn't apply in your situation. In your case, focusing on documenting your financial hardship is your best bet. Gather evidence of your essential expenses (mortgage/rent, utilities, medical bills, etc.) and how the loss of your expected refund creates a significant burden. I'd recommend trying both approaches others have suggested: use a service to help you get through to the IRS by phone, and consider using an analysis tool to strengthen your case with specific references to IRS procedures and regulations. The combination of these approaches gives you the best chance at getting at least a partial release of your refund.

How long did it take to get help from the Taxpayer Advocate? I tried contacting them once about a different issue and never heard back.