Hoping someone can help me out here...
I sold a very small business in 2021 comprised virtually 100 percent of goodwill. And the person who bought it is buying it in installments - one payable in 2021, the other in 2022.
Since selling it to him, I did some independent-contractor work for the business that he will issue me a 1099 for 2021. But now his accountant is trying to tell him that he also should just put the first installment payment for the business on the 1099 too. Makes sense for him, as he'll get to deduct the entire thing from his profits for the year.
But that would subject me to the double hit (payroll taxes) that comes with 1099 compensation. And my understanding is proceeds from the sale of a business should not be taxed that way.
I've looked around online and have a found a couple IRS forms that may or may not be relevant here.
Installment sale
Asset allocation
But I'm fairly out of my element here. Any idea on how this should be reported and what my tax hit should be?