I just went through this exact scenario with my craft business! I purchased $3,750 in materials in December 2023 but didn't sell anything until January 2024. My accountant had me file a Schedule C showing zero income, and we listed the inventory on Part III but didn't claim it as COGS yet since nothing sold. We did deduct my $850 in legitimate business startup expenses like my LLC filing fee, website costs, and business cards. The inventory will become COGS when I file my 2024 taxes as items sell.

Thanks for all the helpful responses everyone! Just to clarify a few additional points that might help other newcomers in similar situations: Make sure you keep detailed records of your inventory purchases with receipts and invoices - the IRS will want to see documentation if questioned. Also, don't forget about the business use of home deduction if you're operating from your residence. Even with zero sales, you can still claim a portion of your home expenses if you have a dedicated business space. And regarding accounting methods - you typically need to choose cash vs accrual when you file your first Schedule C, so research which makes more sense for your business type before filing.

Has anyone dealt with Social Security and Medicare taxes on a TN visa? My employer withheld these taxes from my paychecks, but I've heard conflicting information about whether TN visa holders are exempt under the totalization agreement between US and Canada.

I went through this exact same situation last year as a TN visa holder from Canada! The advice about filing Form 1040-NR as a nonresident is spot on. One thing I'd add is to be extra careful about the tax treaty elections - Form 8833 can save you money but you need to file it correctly. Also, don't forget about state tax implications even though you're in Washington (lucky you - no state income tax!). Some states have different residency rules than federal, but WA makes it simple. For the FBAR reporting, the threshold is $10,000 USD aggregate in all foreign accounts at any point during the year. So if your Canadian accounts totaled more than $10K at any time in 2022, you need to file FinCEN Form 114 by April 15th (no extensions allowed). One mistake I made was not keeping good records of my Canadian tax payments. If you have any investment income from Canada that was subject to withholding tax there, make sure to claim the Foreign Tax Credit on Form 1116 to avoid double taxation. The tax software mentioned above (taxr.ai) actually helped me catch this - saved me about $800! The deadline pressure is real, but you've got this! Consider getting help if your situation is complex, but for a straightforward W-2 situation, the nonresident-specific software should handle it well.

Sorry to butt in, but I had a similar issue and I think you're overthinking this. My FAFSA appeal just needed proof of income change, not specifically a "termination letter." I submitted my dad's old 1099s, recent bank statements showing no more deposits from that company, and a simple letter he wrote explaining when and why his contract ended. The financial aid office approved it no problem. They deal with independent contractors all the time - they know you guys don't get formal termination letters! Just call your financial aid office directly and ask what alternative documentation they'll accept instead of focusing on this one document.

I went through this exact situation last year with my mom who was also a 1099 contractor! Your dad is partially right - companies aren't legally required to provide termination letters to independent contractors like they do for employees. But that doesn't mean you're stuck. Here's what worked for us: Instead of asking for a "termination letter," we requested a simple "confirmation of contract period" email. Companies are often more willing to provide basic dates since it's just confirming facts, not making any statements about termination reasons. For your FAFSA appeal, gather these documents: - Your dad's most recent 1099 form showing his previous income - Bank statements from the last 6 months showing when payments from that company stopped - Any final invoice he sent that wasn't paid or was the last one - A simple written statement from your dad explaining when and why the contract ended Most financial aid offices understand that 1099 workers don't have the same documentation as W-2 employees. Call your school's financial aid office directly and explain the situation - they likely have standard procedures for exactly this scenario. Don't let the two-week deadline stress you out too much; they deal with contractor income changes all the time and know what alternative documentation works. Good luck with your appeal!

Quick question - does anyone know if my son would qualify for first-time penalty abatement for something like this? He's never had any tax issues before.

I'm dealing with a very similar situation right now! My son got hit with a massive crypto tax bill because the IRS treated all his trades as pure income with zero cost basis. What saved us was immediately gathering ALL transaction records from his exchange - not just the 1099-B forms. The key thing I learned is that you need to create a detailed spreadsheet showing every single buy and sell transaction with dates, amounts, and the actual gain/loss for each trade. Most crypto exchanges keep this data even if they don't report it properly to the IRS. Since you're so close to the deadline, definitely file that Tax Court petition to preserve your rights - you can always settle later once you have proper documentation. The petition form is actually pretty straightforward and you don't need a lawyer to file it initially. Just make sure to include a statement that you're disputing the calculation method and will be providing corrected documentation. Also, request penalty abatement since your daughter has no prior tax issues. The IRS is usually reasonable about waiving penalties when taxpayers make good faith efforts to correct reporting errors, especially with crypto where the tax rules are still confusing for many people.

Anyone using TaxAct for their 1120S? Reviews look decent but wondering if it actually walks you through all the required forms and schedules properly.

As someone who just went through this exact same transition from LLC to S-Corp last year, I feel your pain! The paperwork is definitely overwhelming at first. Beyond what others have mentioned, don't forget about Form 8869 (Qualified Subchapter S Subsidiary Election) if you have any subsidiaries, and Form 1125-A (Cost of Goods Sold) if your construction company maintains inventory of materials. Also, since you're in construction, you'll likely need to pay attention to the uniform capitalization rules under Section 263A if your average gross receipts exceed $29 million over the prior 3-year period. For a $375k revenue company you're probably fine, but it's worth knowing about as you grow. One thing I wish I'd known earlier - keep really detailed records of your shareholder basis throughout the year. The K-1 calculations get tricky if you don't track your initial investment, additional contributions, and distributions properly. Makes next year's filing much smoother!