Would the installment sale thing be obvious on the K-1? Mine has so many attached statements and codes that I can barely make sense of it. Is there a specific form or attachment I should be looking for?

The installment sale election would be indicated on your K-1 with box 6c checked (it's labeled "Net section 1231 gain"). Then there should be an attached statement with "Form 6252" or "Installment Sale" in the title that breaks down the gross profit percentage. If your K-1 doesn't have this, ask your company specifically whether they're reporting the transaction as an installment sale. If they're not, you unfortunately will have to recognize the full gain in the current year. In that case, you should request a "tax distribution" to cover the taxes on income you haven't actually received yet - most partnership agreements have provisions for this.

I went through an audit last year because of exactly this situation. The key was having detailed documentation from the company explaining exactly how they calculated the reported gain and why the distribution was lower. The IRS actually understood the concept pretty well once I provided the paperwork. Make sure you get: 1) The original PIU agreement, 2) Documentation of the sale transaction, 3) Calculation of your proportional interest, and 4) Explanation of why distributions differed from allocated gain. With those four things, my audit was resolved in my favor.

Is there a minimum amount of 1099 income before you have to pay self-employment tax? I'm only doing very occasional freelance work.

If your net self-employment income is $400 or more for the year, you need to pay self-employment tax. It's a much lower threshold than for income tax. So even very occasional freelance work can trigger self-employment tax requirements. For income tax purposes, you'd only need to file if your total income exceeds the standard deduction amount, but self-employment tax kicks in at just that $400 level. This catches many part-time contractors off guard.

Any recommendations for a good app to track all this stuff? I'm terrible at keeping receipts and always scrambling at tax time.

Thanks for confirming what I suspected. Do you think there's a certain income threshold where it makes sense to make the switch to S-Corp taxation? I've heard the extra administrative costs might not be worth it below a certain profit level.

Great question. Generally, most tax pros I've worked with suggest the S-Corp election starts making financial sense when your net profit is around $40,000-$50,000 annually. Below that, the administrative costs often eat up the tax savings. For context, you'll have additional expenses like payroll processing (around $50-100/month), possibly more complex tax preparation fees ($800-1500 vs maybe $300-500 for a simple Schedule C), and you'll need to run actual payroll at least quarterly. Some states also have additional fees for S-Corps. In California, for example, there's a minimum $800 annual tax just for having an S-Corp.

This is a great point. The IRS looks at several factors to determine worker classification. Having a single source of income definitely raises flags. Other factors include: who controls when and how the work is done, who provides equipment/supplies, and whether the relationship is ongoing or project-based.

I emailed both my senators last week! One office actually responded saying the senator co-sponsored the bill to raise the married SALT cap to $20k. The more people who contact their reps, the better chance we have.

My guess is budget impact - making it permanent would show a much bigger revenue loss on the CBO score. By making it one year only, they can claim it's a smaller budget hit. Plus the whole TCJA expires after 2025 anyway, so they can just say "we'll fix it permanently when we do comprehensive tax reform"... which of course never happens lol.

Do you think it creates any additional audit risk to file these when not required? I've heard conflicting things about "poking the bear" with extra schedules vs just filing the minimum required.

In my experience, filing these additional schedules doesn't increase audit risk - if anything, it may reduce it. The IRS is generally more interested in returns that appear to be hiding information rather than providing extra documentation. The audit selection process focuses primarily on income discrepancies, unusual deductions, and statistical anomalies compared to similar businesses. Simply providing a more complete financial picture with Schedules L and M-1 doesn't typically trigger additional scrutiny. In the rare case you do get selected for audit, having this documentation already prepared actually makes the process smoother since you've already organized and reported the information they'd likely request anyway.

That's a great suggestion about tracking with a spreadsheet. Do you have a template or specific format you follow? I'm using QuickBooks but honestly not sure I've set it up correctly for tracking the balance sheet stuff properly.