I have an S corp making about $200k/year while I work full-time elsewhere. My accountant made me set up payroll and take a $60k salary even though I argued I barely spend time on it. His reasoning: if your business makes good money, the IRS assumes you're providing valuable services. Think about it this way - if your business is successful enough to make $400-650k, someone's expertise is driving that success. If it's yours, you need to be compensated with a reasonable salary. The reasonable salary doesn't mean you have to take all profits as salary - just what would be reasonable for the services you provide. The rest can still be distributions.

I went through this exact situation two years ago and learned the hard way that the IRS doesn't care about your other employment when it comes to S corp salary requirements. I was making $120k at my day job and my S corp was pulling in about $300k, but I wasn't paying myself any salary from the business. Got audited and the IRS agent was very clear: if your S corp is generating substantial profit and you're providing services (even part-time), you need reasonable compensation. They don't look at your total income across all sources - they look at each entity separately. I ended up having to pay back payroll taxes plus penalties. My advice: once your S corp is consistently profitable (especially at the levels you're talking about), set up payroll immediately. The "reasonable" salary depends on your industry and role, but for a business making $400-650k, you're definitely looking at a significant salary requirement. The Medicare taxes alone make it worth getting this right from the start. Don't make the same mistake I did - the penalties and interest add up fast.

I had this exact same issue a few weeks ago! Super frustrating when you need your transcript urgently. What worked for me was actually a combination of things - first I cleared all my browser data (cookies, cache, everything), then I tried accessing the site at like 6 AM when their servers aren't as loaded. When I still got the authorization error, I ended up going through the full ID verification process again which was annoying but only took about 15 minutes. The key is having all your documents ready beforehand - SSN, last year's AGI, a credit card or bank account number for verification, and your phone for the text code. Once I got back in, I made sure to bookmark the direct transcript page and log in monthly now so it doesn't happen again. Good luck with your mortgage application!

This happened to me too about a month ago! Super annoying timing since I was also dealing with a mortgage application. What finally worked for me was using incognito/private browsing mode after clearing all my cookies. Sometimes the IRS site gets confused with old session data. If that doesn't work, the verification process isn't too bad - just make sure you have your AGI from last year's return handy since that's usually what trips people up. The whole thing took me maybe 20 minutes once I had everything ready. Hope you get it sorted quickly for your mortgage app!

This has been such an educational thread! As someone who's also navigating the transition from W-2 to freelance, I really appreciate everyone sharing their experiences and mistakes. It's reassuring to know that confusion about the Safe Harbor rule is so common. One thing I'd add for anyone else reading this - if you're feeling overwhelmed by all the calculations and rules, don't be afraid to invest in a consultation with a tax professional, especially in your first year of freelancing. I spent about $200 for an hour with a CPA who specialized in self-employed individuals, and it saved me thousands in avoided mistakes and missed deductions. Connor, your 30% savings strategy is smart! I'd also suggest reviewing and adjusting that percentage after your first year based on your actual effective tax rate. Some freelancers find they need closer to 25% while others need 35%+ depending on their income level, state taxes, and available deductions. The key thing I've learned is that being proactive about estimated taxes (even if you mess up the first year) puts you way ahead of freelancers who just ignore it completely and get blindsided at tax time. You're asking the right questions and taking action - that's what matters most!

This thread has been incredibly helpful for understanding the Safe Harbor rule! I'm in a similar boat - just started freelancing this year after leaving my corporate job, and I was completely lost about estimated taxes. One thing I learned from my accountant that might help others: if you're really behind on estimated payments like Connor was, you can sometimes avoid or reduce penalties by filing Form 2210 with your tax return and requesting "annualized income installment method" treatment. This is especially helpful if your freelance income started later in the year or was heavily weighted toward certain quarters. Also, don't forget about the additional Medicare tax if your income goes above certain thresholds ($200k for single filers). It's an extra 0.9% that catches some high-earning freelancers off guard. Connor, your plan looks great! That separate tax savings account is absolutely essential. I also set up automatic transfers of 30% from my business checking to my tax savings account every time I get paid. It removes the temptation to spend that money and makes quarterly payments much less stressful. Thanks to everyone for sharing their experiences - this kind of peer-to-peer learning is invaluable when navigating the complexities of freelance taxes!

I've been following this thread closely since I'm dealing with a very similar PayPal reimbursement situation. What really strikes me is how many people seem to be in the same boat - it's clearly a common issue that more taxpayers are facing as digital payments become the norm. One thing I wanted to add based on my research: if you're using FreeTaxUSA like the original poster, they have a really helpful FAQ section specifically about 1099-K reporting that walks through the Schedule C process step by step. I found it easier to follow than some of the other tax software explanations. Also, for anyone still worried about this - I spoke with a tax preparer friend who confirmed that the IRS sees tons of these reimbursement situations every year. As long as you have proper documentation showing the money was just passing through (receipts, communications, matching amounts), they're not looking to penalize people for legitimate reimbursements. The key is just making sure you report it properly rather than ignoring it entirely. The peace of mind is worth the extra paperwork!

I'm really glad I found this thread! I'm dealing with a similar situation where I received $1,200 through PayPal G&S for buying camping gear for a group trip. Everyone in our hiking club chipped in to reimburse me for the tents and equipment I purchased upfront. Reading through all these responses has been incredibly educational. I had no idea about the $600 threshold for 1099-K reporting, and I was completely clueless about how to handle this on my taxes. The Schedule C approach with offsetting income and expenses makes perfect sense now that everyone's explained it. What I find most reassuring is hearing from multiple people who've successfully navigated this exact situation. The documentation tips are invaluable too - I have all the group emails about the trip planning and individual messages from people sending their share of the costs. For anyone else stressed about this like I was: keep all your purchase receipts, save any communications showing it was a reimbursement arrangement, and don't panic! From what I'm learning here, this is a very manageable situation as long as you report it properly and have good documentation.

Don't forget about your state tax ID too! Depending on your state, you might need a separate sales tax permit for selling baked goods, even if you're using the same federal EIN. In my state, food items have different tax rules than retail goods.

Great question! I went through something similar when I switched from freelance graphic design to running a small catering business. You can definitely reuse your existing EIN since it's tied to your business entity, not the specific type of business activity. The key things you'll want to do: 1) File Form 8822-B to update the IRS about your business activity change, 2) Make sure you understand the cottage food laws in your state (they vary a lot!), and 3) Look into whether you need any local business licenses or health department permits for food preparation. Since you never actually operated the original business or filed any returns, you shouldn't have any compliance issues. Just treat this as reactivating your EIN for a new venture. The IRS cares more about proper reporting going forward than what you originally intended to do with the number.