How to fill the IRS Offer In Compromise with an underwater asset?
"You're supposed to be filling form 433-A. Vehicles are on line 18. You will fill there the current fair value of the car and the current balance on the loans. The last column is ""equity"", which in your case will indeed be a negative number. The ""value"" is what the car is worth. The ""equity"" is what the car is worth to you. IRS uses the ""equity"" value to calculate your solvency. Any time you fill a form to the IRS - read the instructions carefully, for each line and line. If in doubt - talk to a professional licensed in your state. I'm not a professional, and this is not a tax advice." If you have both consumer debt and IRS debt, you can file Chapter 7 bankruptcy to get rid of all of it. The trick is your taxes have to be at least 3 years old from the due date in order to be considered for bankruptcy. So newer taxes, like 2010 and on, can't be discharged yet (and earlier ones may not be yet, there are rules which toll the time) You'll definitely want to talk to a bankruptcy attorney in your area who focusing on discharge in tax debts. You may be able to kill two birds with one stone.  My other concern is are you current? Typically people routinely run up a new debt when trying to settle up on 9old debt. So the OIC route may be a waste of your time. Also, $6000 isn't a lot of money, so there's not a lot of room to negotiate down. It's all how you fill out the 656-OIC. I've seen way to many people not fill it out incorrectly.  The IRS has a limited amount of time to collect on a debt, so if there are old taxes, you may be better off getting into CNC status, which it seems like you would qualify for and let the debt expire on your own. That may be another viable solution. Unfortunately, this is really complicated to get the best result. And good tax debt attorneys fees start at the amount of taxes you owe! So that's not really cost effective to hire one.
Unfortunately, it's a simple 'no'. Once the IRS has your money, you need to wait until early next year to settle up. He can increase his allowances via form W4, and have less money withheld from pay checks the rest of this year, but no chance for a lump sum return before tax time.  For sake of a comprehensive answer, early withdrawals are subject to a 10% penalty along with regular income tax. It sounds like the son is in the 15% bracket, and a total 25% would have been the right number to choose. "You cant! There is the risk that between the time you get the check and the time you get to the bank that you will be murdered, have a heart attack, stroke, or aneurysm too.  And they are probably more likely than the bank going out of business between the time you deposit the money and get access to it. Prior to accepting the check I would do the following: Get a lawyer that specializes in finance and tax law.  There are some steps you can take to minimize your tax exposure.  There is little you can do about the immediate tax on the winnings but there are things you can do to maximize the return of your money.    You will want to do what you can to protect that money for yourself and your family.  Also create or revise your will.  This is a lot of money and if something happens to you people from your family and ""friends"" will come out of the woodwork trying to claim your money.  Make sure your money goes where you want it to in the event something happens to you. Get a financial planner.  This money can either make you or break you.  If you plan for success you will succeed.  If you trust yourself to make good decisions with out a plan, in a few years you will be broke and wondering what happened to your money. Even at 1% at 20million dollars that is 200k a year in interest... a pretty good income by itself.  You do not have to save every penny but you can plan for a nice lifestyle that will last, if you plan and stick to your plan. Do research and know what bank you are going to deposit the money in.  Talk to the bank let them know of your plans so they can be ready for it.  It is not every day that they get a 20 million dollar deposit.  They will need to make plans to handle it.  If you are going to spread the money out among several banks they can prepare for that too. When choosing that bank I would look for one where their holdings are significantly more than you are depositing.  I would not really go with one of the banks that was rescued.  They have already shown that they can not handle large sums of money and assuming they will not screw it up with my money is not something I would be comfortable with.  There were some nice sized banks that did not need a bail out.  I would choose one of them." I don't believe you can do that. From the IRS: Finally, certain types of property are specifically excluded from Section 1031 treatment. Section 1031 does not apply to exchanges of: I highlighted the relevant items for emphasis. "No, you cannot. ISO are given to you in your capacity as an employee (that's why it is ""qualified""), while your IRA is not an employee. You cannot transfer property to the IRA, so you cannot transfer them to the IRA once you paid for them as well. This is different from non-qualified stock options (discussed in this question), which I believe technically can be granted to IRA. But as Joe suggests in his answer there - there may be self-dealing issues and you better talk to a licensed tax adviser (EA/CPA licensed in your State) if this is something you're considering to do." "If he DOES get money, the minimum amount of time will be 20-25 years from now.   The money comes from the IRS and has to be signed off by a bunch of elected folks AND has to be pushed by the individual agent.  Everybody will see multi-millions as ""too much"" and opt for something reasonable." "I'm not 100% certain on boats, since they aren't typically sold for a gain, but the tax base of an asset is typically the cost of the asset plus the cost of any improvements, so your $15,000 gain looks right (check with a CPA to be certain, though, if you can).  Your ""cost basis"" would be $50,000 + $25,000 = $75,000, and your net gain would be $90,000 - $75,000 = $15,000.  The result is the same, but the arithmetic is organized a little differently. I am fairly confident you cannot include your time in the ""cost of improvements"".  If you incorporated and ""paid yourself"" for the time, then the payment would be considered income (and taxed), if it was even allowed. Depending on your tax bracket that may be a WORSE option for you. You can look at it this way - you only pay the tax on the $15k gain versus paying someone else $15k to do the labor." "There are different schools of thought. You can ask the IRS - and it would not surprise me if you got different answers on different phone calls. One interpretation is that a put is not ""substantially identical"" to the disposed stock, therefore no wash is triggered by that sale. However if that put is exercised, then you automatically purchase the security, and that is identical. As to whether the IRS (or your brokerage firm) recognizes the identical security when it falls out of an option, I can't say; but technically they could enforce it because the rule is based on 30 days and a ""substantially identical"" stock or security. In this interpretation (your investor) would probably at least want to stay out of the money in choosing a strike price, to avoid exercise; however, options are normally either held or sold, rather than be exercised, until at or very close to the expiration date (because time value is left on the table otherwise). So the key driver in this interpretation would be expiration date, which should be at least 31 days out from the stock sale; and it would be prudent to sell an out of the money put as well, in order to avoid the wash sale trigger. However there is also a more unfavorable opinion - see fairmark.com/capgain/wash/wsoption.htm where they hold that a ""deep in the money"" option is an immediate trigger (regardless of exercise). This article is sage, in that they say that the Treasury (IRS) may interpret an option transaction as a wash if it's ballpark to being exercisable. And, if the IRS throws paper, it always beats each of paper, rock and scissors :( A Schwab article (""A Primer on Wash Sales"") says, if the CUSIPs match, bang, wash. This is the one that they may interpret unfavorably on in any case, supporting Schwab's ""play it safe"" position: ""3. Acquire a contract or option to buy substantially identical stock or securities..."" . This certainly nails buying a call. As to selling a put, well, it is at least conceivable that an IRS official would call that a contract to buy! SO it's simply not a slam dunk; there are varying opinions that you might describe as ranging from ""hell no"" to ""only if blatant."" If you can get an ""official"" predetermination, or you like to go aggressive in your tax strategy, there's that; they may act adversely, so Caveat Taxfiler!" "Depositum irregulare is a Latin phrase that simply means ""irregular deposit."" It's a concept from ancient Roman contract law that has a very narrow scope and doesn't actually apply to your example. There are two distinct parts to this concept, one dealing with the notion of a deposit and the other with the notion of irregularity. I'll address them both in turn since they're both relevant to the tax issue. I also think that this is an example of the XY problem, since your proposed solution (""give my money to a friend for safekeeping"") isn't the right solution to your actual problem (""how can I keep my money safe""). The currency issue is a complication, but it doesn't change the fact that what you're proposing probably isn't a good solution. The key word in my definition of depositum irregulare is ""contract"". You don't mention a legally binding contract between you and your friend; an oral contract doesn't qualify because in the event of a breach, it's difficult to enforce the agreement. Legally, there isn't any proof of an oral agreement, and emotionally, taking your friend to court might cost you your friendship. I'm not a lawyer, but I would guess that the absence of a contract implies that even though in the eyes of you and your friend, you're giving him the money for ""safekeeping,"" in the eyes of the law, you're simply giving it to him. In the US, you would owe gift taxes on these funds if they're higher than a certain amount. In other words, this isn't really a deposit. It's not like a security deposit, in which the money may be held as collateral in exchange for a service, e.g. not trashing your apartment, or a financial deposit, where the money is held in a regulated financial institution like a bank. This isn't a solution to the problem of keeping your money safe because the lack of a contract means you incur additional risk in the form of legal risk that isn't present in the context of actual deposits. Also, if you don't have an account in the right currency, but your friend does, how are you planning for him to store the money anyway? If you convert your money into his currency, you take on exchange rate risk (unless you hedge, which is another complication). If you don't convert it and simply leave it in his safe, house, car boot, etc. you're still taking on risk because the funds aren't insured in the event of loss.  Furthermore, the money isn't necessarily ""safe"" with your friend even if you ignore all the risks above. Without a written contract, you have little recourse if a) your friend decides to spend the money and not return it, b) your friend runs into financial trouble and creditors make claim to his assets, or c) you get into financial trouble and creditors make claims to your assets. The idea of giving money to another individual for safekeeping during bankruptcy has been tested in US courts and ruled invalid. If you do decide to go ahead with a contract and you do want your money back from your friend eventually, you're in essence loaning him money, and this is a different situation with its own complications. Look at this question and this question before loaning money to a friend. Although this does apply to your situation, it's mostly irrelevant because the ""irregular"" part of the concept of ""irregular deposit"" is a standard feature of currencies and other legal tender. It's part of the fungibility of modern currencies and doesn't have anything to do with taxes if you're only giving your friend physical currency. If you're giving him property, other assets, etc. for ""safekeeping"" it's a different issue entirely, but it's still probably going to be considered a gift or a loan. You're basically correct about what depositum irregulare means, but I think you're overestimating its reach in modern law. In Roman times, it simply refers to a contract in which two parties made an agreement for the depositor to deposit money or goods with the depositee and ""withdraw"" equivalent money or goods sometime in the future. Although this is a feature of the modern deposit banking system, it's one small part alongside contract law, deposit insurance, etc. These other parts add complexity, but they also add security and risk mitigation. Your arrangement with your friend is much simpler, but also much riskier.  And yes, there probably are taxes on what you're proposing because you're basically giving or loaning the money to your friend. Even if you say it's not a loan or a gift, the law may still see it that way. The absence of a contract makes this especially important, because you don't have anything speaking in your favor in the event of a legal dispute besides ""what you meant the money to be."" Furthermore, the money isn't necessarily safe with your friend, and the absence of a contract exacerbates this issue. If you want to keep your money safe, keep it in an account that's covered by deposit insurance. If you don't have an account in that currency, either a) talk to a lawyer who specializes in situation like this and work out a contract, or b) open an account with that currency. As I've stated, I'm not a lawyer, so none of the above should be interpreted as legal advice. That being said, I'll reiterate again that the concept of depositum irregulare is a concept from ancient Roman law. Trying to apply it within a modern legal system without a contract is a potential recipe for disaster. If you need a legal solution to this problem (not that you do; I think what you're looking for is a bank), talk to a lawyer who understands modern law, since ancient Roman law isn't applicable to and won't pass muster in a modern-day court." "First - Welcome to Money.SE. You gave a lot of detail, and it's tough to parse out the single question. Actually, you have multiple issues. $1300 is what you need to pay the tax? In the 25% bracket plus 10% penalty, you have a 65% net amount. $1300/.65 = Exactly $2000. You withdraw $2000, have them (the IRA holder) withhold $700 in federal tax, and you're done.  All that said, don't do it. Nathan's answer - payment plan with IRS - is the way to go.  You've shared with us a important issue. Your budget is running too tight. We have a post here, ""the correct order of investing"" which provides a great guideline that applies to most visitors. You are missing the part that requires a decent sized emergency fund. In your case, calling it that, may be a misnomer, as the tax bill isn't an unexpected emergency, but something that should have been foreseeable. We have had a number of posts here that advocate the paid in full house. And I always respond that the emergency fund comes first. With $70K of income, you should have $35K or so of liquidity, money readily available. Tax due in April shouldn't be causing you this grief. Please read that post I linked and others here to help you with the budgeting issue.  Last - You are in an enviable position, A half million dollars, no mortgage, mid 40s. Easily doing better than most. So, please forgive the soapbox tone of the above, it was just my ""see, that's what I'm talking about"" moment from my tenure here." Do not try to deposit piece wise. Either use the system in complete transparence, or do not use it at all. The fear of having your bank account frozen, even if you are in your rights, is justified. In any case, I don't advise you to put in bank before reaching IRS. Also keep all the proof that you indeed contacted them. (Recommended letter and copy of any form you submit to them) Be ready to also give those same documents to your bank to proove your good faith. If they are wrong, you'll be considered in bad faith until you can proove otherwise, without your bank account. Do not trust their good faith, they are not bad people, but very badly organized with too much power, so they put the burden of proof on you just because they can. If it is too burdensome for you then keep cash or go bitcoin. (but the learning curve to keep so much money in bitcoin secure against theft is high) You should declare it in this case anyway, but at least you don't have to fear having your money blocked arbitrarily. Assuming that what you want to do is to counter the capital gains tax on the short term and long term gains, and that doing so will avoid any underpayment penalties, it is relatively simple to do so. Figure out the tax on the capital gains by determining your tax bracket. Lets say 25% short term and 15% long term or (0.25x7K) + (0.15*8K) or $2950.  If you donate to charities an additional amount of items or money to cover that tax. So taking the numbers in step 1 divide by the marginal tax rate $2950/0.25 or $11,800.  Money is easier to donate because you will be contributing enough value that the IRS may ask for proof of the value, and that proof needs to be gathered either before the donation is given or at the time the donation is given. Also don't wait until December 31st, if you miss the deadline and the donation is counted for next year, the purpose will have been missed. Now if the goal is just to avoid the underpayment penalty, you have two other options.  The safe harbor is the easiest of the two to determine. Look at last years tax form. Look for the amount of tax you paid last year. Not what was withheld, but what you actually paid. If all your withholding this year, is greater than 110% of the total tax from last year, you have reached the safe harbor. There are a few more twists depending on AGI Special rules for farmers, fishermen, and higher income taxpayers.   If at least two-thirds of your gross income for tax year 2014 or 2015   is from farming or fishing, substitute 662/3% for 90% in (2a) under   the General rule, earlier. If your AGI for 2014 was more than $150,000   ($75,000 if your filing status for 2015 is married filing a separate   return), substitute 110% for 100% in (2b) under General rule ,   earlier. See Figure 4-A and Publication 505, chapter 2 for more   information. I wouldn't do this. There is a chance that your check could get lost/misdirected/misapplied, etc.  Then you would need to deal with the huge bureaucracy to try to get it fixed while interest and penalties pile up.   What you can do is have the IRS withdraw the money themselves by providing the rounting number and account number of your bank.  This should work whether is it a traditional brick and mortar bank or an online bank. "After much research, the answer is ""a"": recompute the tax return using the installment sales method because (1) the escrow payment was subject to ""substantial restrictions"" by virtue of the escrow being structured to pay buyer's indemnification claims and (2) the taxpayer did not correctly elect out of the installment method by reporting the entire gain including the escrow payments on the return in the year of the transaction." "Here's what's going to happen: At the last minute, he's going to ""discover"" that for some reason first you must send him $10,000.  He'll tell you not to worry, as he's still going to send you $40,000... now $50,000. In fact, he's going to tell you that he'll send you $60,000 and tell you to keep the $10,000 as a ""finders fee"". Then you will send him, $10,000 and he will walk away with your $10,000.  You'll never hear from him again. This is a very common scam. The best way to avoid it is not to tell him you won't do it for IRS reasons. The best thing to do is to stop accepting email from him and (optionally) report him to law enforcement." "Your assertion that you will not be selling anything is at odds with the idea that you will be doing tax loss harvesting.  Tax loss harvesting always involves some selling (you sell stocks that have fallen in price and lock in the capital losses, which gives you a break on your taxes).  If you absolutely prohibit your advisor from selling, then you will not be able to do tax loss harvesting (in that case, why are you using an advisor at all?). Tax loss harvesting has nothing to do with your horizon nor the active/passive difference, really. As a practical matter, a good tax loss harvesting plan involves mechanically selling losers and immediately putting the money in another stock with more-or-less similar risk so your portfolio doesn't change much.  In this way you get a stable portfolio that performs just like a static portfolio but gives you a tax benefit each year.  The IRS officially prohibits this practice via the ""wash sale rule"" that says you can't buy a substantially identical asset within a short period of time.  However, though two stocks have similar risk, they are not generally substantially similar in a legal sense, so the IRS can't really beat you in court and they don't try.  Basically you can't just buy the same stock again. The roboadvisor is advertising that they will perform this service, keeping your portfolio pretty much static in terms of risk, in such a way that your tax benefit is maximized and you don't run afoul of the IRS."