This is a great example of why it's so important to understand the difference between sales tax and income tax obligations! I've seen this confusion come up repeatedly with online marketplace transactions. Just to reinforce what others have said with a slightly different angle: even if this seller somehow did have a sales tax collection obligation (which is unlikely for a casual collector), the proper way to handle a mistake like this would be for them to absorb the cost, not pass it to you. Businesses that forget to collect required sales tax are typically responsible for paying that tax out of their own pocket to the state - they can't go back to customers after the fact. The seller mentioning PayPal's IRS reporting really shows they don't understand the difference between income reporting and sales tax collection. The 1099-K form is just PayPal telling the IRS "we paid this person X amount of money" - it doesn't create any new tax obligations for buyers or change anything about sales tax requirements. You're absolutely doing the right thing by standing firm on this. The agreed price was $325, you paid $325, and that transaction is complete. Don't let their confusion about their own tax obligations become your financial problem!

This thread perfectly illustrates why tax education is so important for anyone doing online transactions! As someone who's dealt with similar confusion in the past, I want to emphasize a key point that might help others in similar situations. The seller's mention of "PayPal reporting to the IRS" is a classic red flag that they're mixing up income tax reporting with sales tax collection. When PayPal issues a 1099-K, they're simply documenting income flow - this has zero impact on whether sales tax should have been collected from you as the buyer. Here's what I always tell people: if someone tries to collect additional money after a transaction is complete, ask yourself "would a legitimate store be able to do this?" The answer is almost always no. Target can't call you a week after your purchase saying they forgot to charge you sales tax. Amazon can't email you asking for extra shipping fees they overlooked. The same principle applies to individual sellers. You handled this exactly right by questioning it instead of just paying. Too many people get intimidated by official-sounding tax language and end up paying for things they don't actually owe. Stick to your position - your $325 payment completed the transaction as agreed.

Has anyone actually dealt with getting the penalty reduced? I filed almost 90 days late for 2024 taxes and am looking at about $600 in penalties on a $2,500 tax bill. First time I've ever filed late.

Based on everyone's experiences here, it sounds like there are actually several penalty relief options that most people don't know about! For anyone dealing with penalties: 1. **First Time Penalty Abatement** - If you've had clean filing history for 3 years, you can get penalties completely removed for your first offense. Just call and ask specifically for this. 2. **Reasonable Cause Abatement** - If you had medical issues, natural disasters, or other circumstances beyond your control, you may qualify for penalty removal. 3. **Payment Plans** - Even if you can't get penalties removed, the IRS offers payment plans that are pretty flexible once you've actually filed. The key takeaway seems to be: **always file on time even if you can't pay**. The failure-to-file penalty (5% per month) is 10x worse than the failure-to-pay penalty (0.5% per month). And don't just accept penalties without exploring your options - sounds like many people are getting significant relief by simply asking for it or getting proper help understanding their situation.

Ryan, I'm dealing with a very similar situation right now! I formed my marketing consulting LLC in December 2022 and spent about $8,000 on a laptop, software licenses, and office furniture, but didn't land my first client until March 2023. What I learned from my CPA is that since your business didn't have any activity in 2022, you're absolutely right that 2023 is considered your first year of operations. The good news is you can still claim those 2022 expenses, but you need to be strategic about how you do it. For equipment like your trailer, you'll want to look into bonus depreciation rules - you might be able to deduct 80% of the cost in 2023 (it was 100% in previous years but is phasing down). The remaining 20% would be depreciated over the normal schedule. One thing that caught me off guard was that I also needed to file a late 2022 return showing the LLC formation even with zero income. It wasn't required, but my CPA said it creates a cleaner paper trail for the IRS and makes it easier to justify carrying those expenses forward. Just something to consider! Make sure you have all your receipts organized by date and keep notes about when you actually started using each piece of equipment for business purposes. The IRS loves documentation!

Ryan, I just went through almost the exact same situation with my LLC! I started mine in October 2022 and bought about $15,000 in equipment but didn't make a penny until early 2023. Here's what I learned after consulting with a tax pro: You can definitely claim those 2022 expenses on your 2023 return since that's when your business actually became active. The IRS considers "active operations" to begin when you start generating income or actively pursuing customers, not when you file paperwork. For your $12,500 in equipment, you'll have a few options: 1. Use Section 179 to deduct the full amount in 2023 (up to $1.16M limit) 2. Take advantage of 80% bonus depreciation for 2023 3. Depreciate normally over several years using MACRS I ended up going with bonus depreciation which let me deduct 80% immediately and spread the remaining 20% over the normal schedule. Saved me a ton in taxes for 2023. One tip: definitely keep detailed records showing when you purchased everything and when you actually started using it for business. I created a simple spreadsheet with purchase dates, business use start dates, and photos of receipts. The documentation really matters if you ever get audited. Also consider whether you want to file an amended 2022 return showing zero income just to establish the business existence - my accountant said it's not required but can help create a cleaner paper trail. No penalties since there's no tax owed.

I'm also going through the exact same cycle 05 transcript situation! My 'as of' date has been bouncing back and forth between February 10th and February 17th for about 9 days now, and I was starting to worry something was seriously wrong with my return until I found this thread. Reading through everyone's experiences has been such a huge relief - it's clear this bouncing pattern is way more normal than the IRS leads us to believe. The explanation about weekly system reviews finally makes sense of what's been happening. I've definitely been guilty of checking my transcript multiple times a day hoping for updates! 😅 I'm also a student depending on my refund for upcoming expenses (spring break trip fund is looking pretty sad right now!), so I totally get the financial stress you're dealing with. It's so frustrating that the IRS doesn't communicate any of this clearly - like why not just have a simple "under weekly review" status instead of these mysterious date gymnastics that make us all panic? Based on what everyone's shared here, it sounds like most people get their DDD within 2-3 weeks of this pattern starting, which gives me hope! The waiting game is absolutely brutal when you're counting on that money, but at least now I understand this is just normal processing behavior. This community has taught me more about transcript codes in one thread than months of trying to navigate confusing IRS resources. Thanks to everyone for sharing their knowledge and experiences! Fingers crossed we all see that magical 846 code soon and can stop being amateur transcript detectives! 🤞

I'm also dealing with a cycle 05 transcript that's been doing the date shuffle! Mine keeps jumping between February 9th and February 16th for the past week. At first I was freaking out thinking something was wrong with my return, but this thread has been incredibly educational. What really helped me understand was learning that cycle 05 means weekly processing, so those date changes are just the system doing its regular weekly check-ins on our accounts. I've been obsessively refreshing my transcript every morning like it's going to magically show an 846 code! 😅 I'm also a student waiting on my refund for textbook costs and lab fees, so I completely relate to the financial stress when you need that money for actual school expenses. The uncertainty is definitely the hardest part! It's honestly frustrating that the IRS doesn't explain any of this clearly - like how hard would it be to just say "under weekly review" instead of these cryptic date changes that send us all into panic mode? This community has been way more helpful than any official IRS resource I've found. Based on everyone's experiences here, it sounds like most people see their DDD within 2-3 weeks of this bouncing pattern starting. The waiting game is rough when school bills are looming, but at least now I know this is normal! Fingers crossed we all get good news soon! 🤞📚

This isn't related to the 5498 form specifically, but make sure you're also keeping track of any backdoor Roth conversions separately! Those have their own reporting requirements on Form 8606.

Just to reinforce what others have said - you're absolutely fine to file without the 5498! I've been dealing with this same "issue" for years with my Fidelity Roth IRA. The key thing to remember is that Form 5498 is sent to the IRS, not included with your return. What I do is keep a simple spreadsheet throughout the year tracking my contributions with dates and amounts. Fidelity's website also has a great year-end summary that shows all your contributions for the tax year - you can usually find this in your account statements or tax documents section online. The May timing is totally normal because brokers wait until after the April 15th deadline to capture any last-minute contributions people make for the previous tax year. Don't let this delay your filing - you've got all the information you need from your own records!