That's a fair point about the amount. My gym is actually $95/month because it has some specialized equipment I use for training. So it would add up to over $1,100 a year, which seems worth deducting if it's legitimate. But I definitely see your point about weighing the potential hassle against the benefit!

$95/month changes things for sure! That's over $1,100 annually, so the tax savings would be more significant. At that price point, it sounds like a premium gym with specific equipment beneficial to your work. Just make sure to document how you use the specialized equipment for referee-specific training. Take photos of yourself using equipment that helps with referee movements, keep a training log showing how your workouts connect to referee requirements, and save any communications from assigning bodies that mention fitness standards. With that kind of documentation and the higher expense amount, the deduction makes more sense.

This is super important advice. The IRS definitely looks at allocation for mixed-use expenses. But how would they even know what percentage you use for business vs personal? It's not like they follow you around the gym...

This is a really important point. My previous employer did this exact thing, and it wasn't an "accident" - it was calculated. When multiple employees filed SS-8 forms, the company ended up getting audited and had to pay massive penalties plus back taxes for everyone they had misclassified. They also had to pay everyone back for the extra self-employment taxes we'd paid.

Exactly. The savings for employers can be substantial - typically around 20-30% of payroll costs. That's why the IRS has been cracking down on this practice. For anyone in this situation, it's worth knowing that the law has protections against retaliation for workers who file SS-8 forms or otherwise challenge their classification status. That doesn't mean it won't create tension, but you do have legal protections if your employer tries to fire you specifically for raising this issue.

If the IRS rules in your favor after filing Form SS-8, they'll typically assess the employer for their share of the FICA taxes (the 7.65% employer portion). You would file Form 8919 with your return to only pay the employee portion rather than the full self-employment tax rate. If you've already filed and paid the full self-employment tax, you can file an amended return to claim a refund for the difference once the determination is made. Just be aware that the SS-8 process can take 6+ months, so you might need to initially pay the higher amount and then amend later.

Thanks for explaining. That makes sense. I'll go ahead and file both forms then since it sounds like I can eventually get back the extra I paid if the determination goes in my favor.

Wait, I hadn't even thought about state taxes! Thank you for bringing this up. So even though I was only in Texas for a few months as a baby, if it had been a state with income tax, I might have needed to file there too? That's wild! Do you know if there's a similar "streamlined" process for state tax compliance?

You generally only need to worry about state taxes if you have current ties to that state (property, income from there, voting registration, driver's license, etc.). Since you left as a baby and have no connections, most states wouldn't consider you a resident. State tax amnesty programs vary widely by state. If you had been born in a high-tax state like California, you might have needed to address it, but their Voluntary Disclosure Program typically looks at fewer years than the federal program. Again, for your Texas situation, it's not a concern, which is one small piece of good news in this complicated situation!

The exit tax typically applies if your net worth is over $2 million or your average annual net income tax for the 5 years ending before the date of expatriation is more than $172,000 (2021 figure). The $50k investment alone wouldn't trigger covered expatriate status.

Thanks for this advice! Do we need to do anything special for sales tax collection? The items were sold to buyers in different states.

Good news - you don't need to worry about sales tax collection. eBay now automatically collects and remits sales tax in all states that require it. That's one headache they've taken off sellers' plates in recent years. Just focus on your income tax obligations - reporting the income on Schedule C, deducting your costs and expenses, and paying tax on the net profit. If you continue selling regularly, you might need to make quarterly estimated tax payments, but for a one-time cleanout of old inventory, you'll likely be fine just reporting it on your annual return.

Would it be better to just ignore the 1099-K and not report it? My cousin did that last year and nothing happened.

Free File Fillable Forms includes Form 7004? I thought those were only available for individual returns like 1040s. Can you really use it for S-corps?

Thanks for the reminder! My S-Corp doesn't have any tax liability (all profits pass through to my personal return), but this is definitely important for C-Corps or S-Corps with certain types of taxes due.