This thread has been incredibly helpful! I'm a freelance photographer specializing in corporate events and headshots, and I've been struggling with expense categorization for my Schedule C. The "would you need this if you weren't serving clients" test is a game-changer. It makes it clear that my Adobe Lightroom/Photoshop subscription, professional camera equipment depreciation, and cloud storage for client galleries should all be COGS since I wouldn't need these if I had zero clients. But I'm curious about travel expenses. When I travel to shoot destination weddings or corporate events, the travel costs are directly tied to delivering that specific service. Would airfare and hotel stays for client shoots be considered COGS, or do they typically go under travel expenses in the operating section? Also wondering about backup equipment - I maintain duplicate camera bodies and lenses specifically so I never have to cancel a client shoot due to equipment failure. These backups sit unused most of the time but are essential for reliable service delivery. Should the depreciation on backup equipment also be classified as COGS? Thanks for all the insights everyone has shared - this is exactly the kind of practical guidance that's so hard to find elsewhere!

As a newcomer to this community, I want to say how incredibly helpful this entire discussion has been! I'm just starting my own bookkeeping service and had no idea about the distinction between COGS and operating expenses for service businesses. The "would you need this if you weren't serving clients" test that's been mentioned throughout this thread is such a practical way to think about categorization. For my bookkeeping practice, this means my QuickBooks ProAdvisor subscription, client portal software, and continuing education for bookkeeping certifications would likely be COGS since they're directly tied to delivering client services. What I'm taking away is that proper COGS classification isn't just about tax compliance - it fundamentally changes how you understand your business profitability and gross margins. I had been planning to put everything under general business expenses, but now I realize that would give me a completely inaccurate picture of my true service delivery costs. One follow-up question for this knowledgeable community: For businesses that are just starting out with minimal clients, should you still classify direct service costs as COGS even if revenue is low? Or does the classification only make sense once you reach a certain scale of operations? Thank you all for sharing your real-world experiences and practical approaches to this complex topic!

I totally get your anxiety about this - I went through the exact same thing last year when my bank account was unexpectedly closed right before my refund hit! The "Funded" status on SBTPG is actually great news - it definitively means your check has been processed and is in the mail. That blank "Amount(s) paid to you" field is completely normal for paper checks and nothing to worry about. SBTPG's system is really built around tracking direct deposits, so when they have to switch to mailing a physical check, that field often just doesn't populate properly. Since your check was mailed March 15th, you should expect it to arrive within 7-12 business days from that date. SBTPG is generally pretty reliable with their timelines - usually faster than regular IRS checks since they're processed through a private company. The check will come in a plain envelope, possibly with a window, and won't be obviously marked as a tax refund for security reasons. If you have USPS Informed Delivery set up, definitely check that daily so you can see what's coming in your mail. That really helped reduce my anxiety when I was in your situation! Since you're already at day 11, it should really be arriving any day now. Try to hang in there - I know exactly how stressful it is when you're counting on that money. Your check is definitely on its way!

I went through this exact same situation a few years ago and completely understand your anxiety! When SBTPG shows "Funded" status, that's actually really good news - it means your check has definitely been processed and mailed out. The blank "Amount(s) paid to you" field is totally normal for paper checks in their system. SBTPG's portal is really designed to track direct deposits, so when they have to issue a physical check instead, that field often doesn't populate correctly. Don't let that worry you at all! Since your check was mailed March 15th, you should expect it to arrive within 7-10 business days typically. SBTPG checks usually come faster than regular IRS paper checks since they're processed through a private company rather than going through the full government system. The check will arrive in a plain envelope - nothing that obviously identifies it as a tax refund for security reasons. If you have USPS Informed Delivery set up, definitely keep checking that daily so you can see what's coming in your mail. You're already at day 11, so it should really be arriving any day now. I know how stressful it is when you're counting on that money, but try to stay patient - your check is definitely on its way! If it doesn't show up by the end of this week, then you can consider reaching out to SBTPG directly.

I'm going through something very similar with my daughter who needs a specialized wheelchair van. One thing I discovered that might help is to also check if your son qualifies for any state vocational rehabilitation services. In many states, if the vehicle modifications help with independence or potential future employment, vocational rehab will cover a significant portion of the costs. Also, definitely keep detailed records of everything - not just the modification costs, but also any medical documentation from your son's doctors stating the medical necessity for the accessible vehicle. I learned the hard way that the IRS wants clear medical justification, not just receipts. For the 401k withdrawal, make sure you understand the timing. You can only use the medical expense exception for unreimbursed medical expenses in the same year as the withdrawal. So if you withdraw in 2025, the medical expenses need to be from 2025 to qualify for the penalty exception. Have you considered financing through the modification company? Many offer medical financing with lower interest rates than what you'd lose by early 401k withdrawal. Sometimes the monthly payments are more manageable than the tax hit from a large withdrawal.

I work for a CPA firm that specializes in disability-related tax issues, and I wanted to add a few important points that might help your situation. First, regarding the van modifications - make sure you get a detailed invoice that separately itemizes the base vehicle cost versus the accessibility modifications. This is crucial for both the medical expense deduction and any potential HSA withdrawals. The IRS will want to see this clear breakdown. For the 401k withdrawal, consider this alternative: many 401k plans allow loans rather than withdrawals. With a 401k loan, you're essentially borrowing from yourself and paying interest back to your own account. The interest rates are usually much lower than medical financing, and there's no early withdrawal penalty. The downside is you typically have to repay within 5 years, but it might be more manageable than the tax hit. Also, don't overlook the possibility of spreading the expenses across tax years if timing allows. If you can pay for some modifications in late 2024 and others in early 2025, you might be able to exceed the 7.5% AGI threshold in both years, maximizing your deductions. Finally, consider consulting with a tax professional who has experience with disability-related expenses before making any major moves. The rules can be complex and the stakes are high with a $70k purchase.

Does anyone know if HSA contributions work the same way? My employee wants to contribute to her HSA through payroll and I'm not sure if I need to pay employer taxes on that portion.

This is such a common source of confusion for small business owners! I went through the exact same thing when I first started my business. The key thing to remember is that retirement contributions like 401k and SIMPLE IRA are "pre-tax" for income tax purposes, but they're still considered wages for FICA (Social Security and Medicare) purposes. So in your example with the $65,000 salary and $25,000 retirement contribution, you'll pay employer FICA taxes on the full $65,000. The employee's income tax withholding will be calculated on $40,000, but that doesn't affect your employer tax obligations. One tip: make sure your payroll system is set up correctly to handle these different tax treatments. I learned this the hard way when I had to file amended returns because my initial setup was wrong. It's worth double-checking with your payroll provider that they're calculating employer taxes on the pre-deduction amounts for retirement contributions. Hope this helps clarify things while you're waiting for your accountant to return!

One more tip: If u have an irs account online (irs.gov) you can access your tax transcripts which often show refund info before Where's My Refund updates. Look for a code 846 with a date - thats ur refund date! Just be warned the transcript is confusing af to read but there's lot of youtube videos explaining how to read it. Way better than refreshing WMR every 5 minutes lol.

Great thread! Just wanted to add another option for those still struggling to track their refunds. If you used Jackson Hewitt and opted for a refund advance or had fees deducted, your refund might be processed through Axos Bank (formerly Bank of Internet USA). You can check the status at their taxpayer portal: https://www.axosbank.com/Personal/Checking/Refund-Transfer Also, for anyone who used Liberty Tax, they typically use Republic Bank as well, same site that Aurora mentioned above. One thing I learned the hard way last year - if you're checking multiple clearing house sites and none of them have your info, that usually means your refund is going directly from the IRS to your bank without a third-party processor. In that case, the IRS tools and your bank are your best bet for tracking!