Gain on sale of a business

[Joneill1186]

Hi all! 

3 years ago I was given a 5% stake of my business. I think it was kind of an incentive to stay with the company. We didn't have to pay anything, it was just given to us for staying with the company. Fast forward to now. Our campany sells, my 5% is purchased for $37,500. My wife and I make a combined $110,000/yr. We have two kids in a modest house in the suburbia of ohio. 

I know there is an estimated tax that I should pay. I know Ohio has a tax on that too. Everything I read sounds like this would be a capital gains tax of 15% and that my ohio tax would be about 4/5%. I was planning on sending in about 7,500 as a prepayment to the IRS. What should I do for the state? 

My coworker said her accountant told her she is going to have to pay half of it in taxes? Am I missing something? 

Thanks in advance for any help.

[Mike9241]

If the company, assuming it was a corporation, had a worth of more than zero, there may have been a big mistake when you were given 5% of the company. If you were given unrestricted rights to it then it should have been reported as compensation on your w-2 based on the fair value of that 5%. that would have given you basis in the stock which would reduce the gain.  This may present issues for both you and your company. For it, the failure to report compensation on the W-2 and pay any associated taxes and your failure to properly report the incentive payment on your 1040 in that year. as I see it your options are to consult a tax pro that can look into the transaction in more detail which may require amending the prior return to report the compensation or take a chance by ignore the past and report the full amount as gain in 2023 

My coworker said her accountant told her she is going to have to pay half of it in taxes? Am I missing something? Don't know what the coworker told her accountant but usually off the cuff advice is notoriously inaccurate.