This is really helpful information everyone! As someone new to self-employment, I was definitely overthinking this. It sounds like the key takeaway is that the 1099-NEC is just a tracking document - I still only report my actual business income once on Schedule C, and that includes everything clients paid me regardless of whether they issued a 1099 or not. The sales tax clarification is huge too. I've been charging sales tax but wasn't sure how it should appear on the 1099-NEC. It's reassuring to know that if a client mistakenly includes sales tax in the 1099 amount, I can offset it as an expense so I'm not paying income tax on money that belongs to the state. Thanks for breaking this down in plain English - much clearer than the IRS publications I was trying to decipher!

Great thread! I'm also new to consulting and have been wrestling with similar 1099-NEC questions. One thing that really helped me understand this better was learning that the 1099-NEC threshold is $600 - meaning clients only have to send you one if they paid you $600 or more during the tax year. But like others mentioned, you still have to report ALL income regardless of whether you get a form. For the sales tax piece, I'd recommend keeping very detailed records of what you collected versus what you actually earned. I create separate line items on my invoices so it's crystal clear what portion is my service fee versus sales tax. This makes it much easier to explain to clients what should go on the 1099-NEC (hint: just the service portion) and helps me track everything correctly for both federal income tax and state sales tax filings. The W-9 form you filled out just gives your client your taxpayer info so they can properly report the payments to the IRS. It's not a tax form you file - it's just paperwork that enables the 1099-NEC process.

This is a complex situation that touches on several tax areas. Based on what you've described, here are the key considerations: **Interest Deductibility**: Unfortunately, the interest on your loan likely won't be deductible. Since your bonuses are paid through payroll as W-2 income, they're considered compensation rather than investment income. This means the interest won't qualify as "investment interest expense" under Section 163(d). **Alternative minimum tax (AMT) considerations**: Even if some portion were potentially deductible, you'd need to consider AMT implications, especially as a high-income earner in NY who itemizes heavily. **Documentation is crucial**: Whatever you decide, make sure you have clear documentation showing the business purpose of the share purchase. Keep your employment agreement, shareholder agreement, and loan documents organized in case of questions. **State vs Federal**: While federal deductions may be limited, some states have different rules. NY sometimes allows deductions that aren't available federally, so check with a local tax professional. Given the 8.75% interest rate and limited deductibility, you might want to run the numbers on alternative financing (HELOC, margin loan, etc.) before committing to the company financing. The potential bonus income sounds attractive, but make sure you're not overpaying for the privilege due to non-deductible interest costs. Have you calculated what your effective after-tax return would be considering the loan interest and your marginal tax rate?

Great question about employee stock purchase plans! Unfortunately, the special tax rules for ESPPs (like those under Section 423) only apply to publicly traded companies, so your situation wouldn't qualify for those benefits. However, there's another angle worth exploring that I haven't seen mentioned yet - the potential for Section 1244 treatment if things go south. Since this is a closely-held C-corp, if the shares ever become worthless or you sell them at a loss, you might be able to claim up to $50,000 ($100,000 if married filing jointly) as an ordinary loss rather than a capital loss under Section 1244. This requires the corporation to meet certain requirements (generally small business stock issued for money or property), but it could provide better tax treatment than the capital loss carryforward situation that Nia mentioned. The ordinary loss deduction would be fully deductible against your income in the year of the loss, rather than being limited to $3,000 annually. You should verify with the company whether their stock qualifies as Section 1244 stock - many closely-held corporations structure their stock issuances to meet these requirements specifically for this tax benefit. Also, regarding your HELOC idea - that's smart thinking. Just make sure you can handle the payment obligations on both the HELOC and your regular expenses if the bonus income doesn't materialize as expected. The share-based compensation sounds promising, but it's still tied to company performance.

What if the boss hired your husband as a "consultant" for the transition to the new owners and paid him $30k for that? Might still be taxable but could potentially be at a better rate if he set up as an independent contractor? Just spitballing here...

I'd strongly recommend getting professional tax advice before proceeding with any of these strategies. While some of the suggestions here have merit, the IRS is very strict about distinguishing between compensation and gifts, especially when there's an employment relationship involved. The key factors the IRS will look at are: 1) the relationship between the parties, 2) the intent behind the payment, and 3) whether it's tied to services rendered. Since this is explicitly described as a reward for "loyalty over the years," it's likely going to be treated as taxable compensation regardless of timing or structuring. If the former boss really wants to help minimize the tax impact, the "gross up" approach mentioned earlier might be the most straightforward legal option. He could calculate the total amount needed to leave your husband with $30k after taxes and pay that larger amount, with the understanding that the extra covers the tax burden. Whatever you decide, make sure to document everything properly and consider consulting with a tax professional who can review your specific situation. With this much money involved, the cost of professional advice is probably worth the peace of mind.

I'm a bit confused by some of these responses. Does the time zone thing apply to all IRS deadlines or just the April filing deadline? What about estimated tax payments?

Don't panic! You're absolutely fine. The IRS operates on a "timely filed" principle based on your local time zone, not Eastern Time. Since you submitted at 11:23pm Pacific Time on April 15th, your return is considered filed on time according to IRS regulations. The April 16th date on your confirmation is likely just when the tax software's servers processed your return or when they transmitted it to the IRS - this can happen due to high traffic volumes on deadline day. What matters legally is when YOU hit submit in your time zone. You should receive an official IRS acceptance email within 24-48 hours that will show the correct filing date. Keep that email as your official record. I've seen this exact situation countless times and it's never been an issue. The IRS systems are designed to handle time zone differences properly. If you're still worried, you can always call the IRS to confirm (though expect long wait times), but based on your description, you're completely in the clear. No late penalties for you!

Has anyone considered the timing here? Since the wife started the FSA in July, couldn't they argue that the HSA was fine for January-June, and then became ineligible only from July onward? That way they'd only need to withdraw half the year's HSA contributions instead of all of it.

Just be really careful about the timing of any HSA withdrawals if you go that route! I learned the hard way that excess contributions need to be withdrawn by the tax filing deadline (including extensions) to avoid the 6% excise tax penalty that applies each year the excess remains in the account. Also, since you mentioned you've already contributed $8,300 for the full year, make sure your payroll department stops any ongoing HSA contributions immediately while you sort this out. You don't want to keep adding to the problem while you're trying to fix it. One more thing - document everything! Keep records of when your wife's FSA started, any communications with HR about potential changes, and if you do need to make HSA withdrawals, keep all the paperwork from your HSA provider. You'll need this documentation for your tax return.