Has anyone had issues with sales tax being included on their 1099-K? My platform reports the full transaction amount including sales tax on the 1099-K, but the sales tax isn't actually my income since I remit it to the state. Should I still report the full 1099-K amount on Schedule C and then deduct the sales tax portion as an expense?

I went through this exact same situation last year with my consulting business. I had multiple 1099-Ks from different payment platforms totaling about $15K, but my actual business income was much higher since I also received direct payments and checks. The key thing to remember is that you report your TRUE total business income on Schedule C Line 1 (gross receipts), not just what's on the 1099-Ks. The 1099-K is just third-party verification of some of your payments - it doesn't limit what you can report as income. When you enter the 1099-K information in your tax software, it's mainly for IRS matching purposes. The software should automatically include those amounts in your Schedule C totals rather than creating separate income categories. Just make sure your Schedule C gross receipts line reflects ALL your business income for the year, including the $9,500 from that 1099-K plus everything else you earned from your reselling business. One tip: keep detailed records showing how your 1099-K amounts tie into your total reported income. This helps if the IRS ever questions the numbers during their automated matching process.

I see a lot of great explanations here, but let me add one practical tip that might help you verify this on your own pay stub. Look at your year-to-date (YTD) totals and do this simple check: take your YTD federal income tax withholding and divide it by your YTD gross income. This will give you your effective federal income tax rate - which should be noticeably lower than your marginal tax bracket (your 22%) because of how the progressive system works. Then separately, you can verify the FICA taxes: your YTD Social Security should be exactly 6.2% of your gross (up to the wage base), and Medicare should be exactly 1.45% of your gross. These percentages will be the same regardless of whether you make $30k or $300k (well, except for the Social Security wage cap and high-earner Medicare surcharge). This helped me finally understand that my "tax bracket" was just one piece of the puzzle, not my overall tax burden. The FICA taxes are completely predictable flat rates, while only the federal income tax portion follows the bracket system everyone talks about.

This thread has been incredibly helpful! I just want to add one more perspective as someone who recently switched from being a W-2 employee to freelancing. When you're self-employed, you really see how separate these taxes are because you have to pay them separately. I now pay quarterly estimated taxes for my federal income tax (which varies based on my income and deductions), but I also have to pay self-employment tax of 15.3% (which is essentially both the employee and employer portions of FICA taxes combined). The self-employment tax is calculated on a flat rate basis just like regular FICA taxes - it has nothing to do with income tax brackets. So even if my income puts me in a lower federal tax bracket this year, I'm still paying that full 15.3% for Social Security and Medicare on my self-employment income. This really drove home for me how these are completely different tax systems that just happen to both be federal taxes. When I was an employee, seeing them all deducted together made it seem like one big "tax," but they're actually funding different programs and calculated in totally different ways.

I'm seeing a lot of great advice here about installment sales, but I want to add something important that hasn't been mentioned yet - make sure you understand the depreciation recapture implications for that $62k in assets. Even with installment treatment, any depreciation you've claimed on business assets over the years gets "recaptured" and taxed as ordinary income (not capital gains) up to a maximum of 25%. This recapture has to be reported in the year of sale, regardless of when you receive the payments. So while your goodwill portion ($313k) can be spread over the installment period at favorable capital gains rates, you might still owe some ordinary income tax in 2025 on the depreciation recapture from your assets. The exact amount depends on how much depreciation you've claimed over the years. This doesn't change the fact that your CPA is wrong about owing taxes on the full amount, but it's an important nuance that could affect your 2025 tax planning. Make sure whoever gives you that second opinion addresses the depreciation recapture component specifically.

I've been following this thread as someone who went through a business sale two years ago, and I want to echo what everyone else is saying - your CPA is absolutely wrong about this! The installment sale method is specifically designed for situations like yours. I sold my marketing agency with very similar terms (30% down, remainder over 5 years) and only paid taxes on the payments I actually received each year. One thing I wish I had known earlier: even though you can use installment treatment, you'll want to set aside cash from that first $75k payment for quarterly estimated taxes throughout 2025. The IRS still expects you to pay estimated taxes on the installment income as you receive the monthly payments. Also, since you mentioned this isn't finalized yet, consider asking your attorney about including a clause that protects you if the buyer defaults. With installment sales, if the buyer stops paying, you can face some complex tax situations around bad debt deductions and potential recapture of previously reported gains. Get that second opinion ASAP - this kind of mistake could cost you a massive amount of unnecessary taxes upfront when you should be spreading that burden over 6 years!

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.

I'm dealing with a very similar situation right now! My spouse and I both work and we accidentally ended up with overlapping HSA and FSA coverage when she changed jobs mid-year. From my research and talking to our benefits administrators, here's what I've learned: the key is acting quickly. The IRS does allow month-by-month eligibility determination for HSAs, so you should be able to keep your contributions for January through June when you were HSA-eligible. A few practical tips based on what I'm going through: 1. Contact your wife's HR immediately - even if they say no initially, explain it's a compliance issue that could result in tax penalties. Some HR departments are more flexible when they understand the tax implications. 2. If you do need to withdraw excess HSA contributions, your HSA administrator should be able to help calculate both the excess amount and any earnings that need to be removed. 3. Keep detailed records of everything - dates when coverage started, contribution amounts by month, and any communications with employers. The limited-purpose FSA conversion really is your best option if possible, since it would let you keep your full HSA contribution and avoid the hassle of calculating prorated amounts. Good luck getting this sorted out!

I'm surprised nobody mentioned Form 2210! If you miss estimated payments but have a reasonable cause, you can sometimes get penalties waived by filing this form with your tax return. Valid reasons can include casualty losses, disasters, or other unusual circumstances. Also, the quarterly payment system is not actually quarters of the calendar year, which trips up a lot of new freelancers. The due dates are: - April 15 (for Jan-Mar income) - June 15 (for Apr-May income) - September 15 (for Jun-Aug income) - January 15 of the next year (for Sep-Dec income

@Brady Clean, based on your income level ($3,200-4,000/month), you'll likely owe more than $1,000 in taxes, so you would normally need to make quarterly payments. However, since you started freelancing in April, you might still be okay if you had enough tax withholding from your W-2 job earlier this year. The key is whether your total withholding from January-March covers at least 100% of what you owed in taxes last year (the "safe harbor" rule others mentioned). If it does, you're protected from penalties even if you don't make estimated payments. If you don't qualify for safe harbor, you technically should have made payments by June 15th and September 15th already. But don't stress too much - the penalties aren't catastrophic. You can still make your remaining payments (due January 15th) and minimize further penalties. My recommendation: Calculate whether you qualify for safe harbor first. If not, make a payment for the January 15th deadline and consider catching up on any missed payments. The IRS is generally reasonable about first-time situations, especially if you make a good faith effort to comply going forward.