Something to consider that nobody mentioned - if you're planning to sell your house in the next few years, claiming depreciation on home improvements for business use can complicate things. You might have to pay depreciation recapture tax when you sell.

Based on my experience as a 1099 contractor who went through a similar electrical upgrade last year, I want to add a few practical tips that might help you navigate this process more smoothly. First, make sure to get detailed invoices from your electrical contractor that clearly break down labor vs. materials costs. The IRS may scrutinize large home improvement deductions, so having comprehensive documentation is crucial. Also, consider getting a letter from your contractor explaining why the upgrade was necessary for your increased electrical load from business equipment - this can serve as additional justification for the business necessity. One thing I learned the hard way: if you're working with multiple contractors or getting quotes, ask them specifically about permits and inspections. The permit fees and inspection costs are also part of your total improvement cost that can be allocated to your business percentage. Also, keep a simple log documenting how the electrical issues were affecting your work (like those lost documents you mentioned). This creates a clear business justification trail. The IRS likes to see that business improvements were truly necessary for your work, not just convenient upgrades you would have done anyway. Finally, consider whether the simplified home office deduction ($5 per square foot, up to 300 sq ft) might be better for your first year if your total home office expenses aren't that high. You can switch between methods year to year, so you're not locked into the actual expense method just because you have this electrical upgrade.

This is such a helpful thread! I've been dealing with the same confusion on my 1120-S. Just to add to what others have said - when you're talking to potential investors, I'd recommend being prepared to discuss both numbers along with context. In my experience, sophisticated investors want to see the full picture: your total income shows your business's revenue-generating capacity, while ordinary business income shows your operational efficiency after expenses. I usually lead with something like "We generated $X in total revenue and had $Y in ordinary business income after all operating expenses." Also, don't forget that investors will likely want to see multiple years of data to assess trends. One thing that helped me was creating a simple one-page summary that shows both figures for the past 2-3 years, along with key ratios like gross margin. It makes the conversation much smoother than trying to explain tax form line items on the spot. Good luck with your investor meeting next month!

Great question about metrics for investors! For gross margin, I actually track it separately from the 1120-S because the form doesn't always break things down the way investors expect to see them. I calculate gross margin as (Total Revenue - Cost of Goods Sold) / Total Revenue. You can usually find the components on your 1120-S, but I keep a separate spreadsheet that tracks this monthly so I can show trends and seasonality patterns. Other metrics investors typically want to see include: - Net profit margin (ordinary business income / total revenue) - Operating expense ratios - Customer acquisition costs (if applicable) - Average transaction size or customer lifetime value The key is showing you understand your unit economics and can explain what drives profitability in your business. Having this data organized before the meeting demonstrates that you're thinking like an investor, not just an operator. One more tip: if your business has any unusual timing issues (like big expenses that only hit certain years), be ready to explain those. Investors appreciate transparency about one-time events vs. recurring patterns.

Just wanted to share my recent experience since I went through this exact process last week! Called the IRS main number (1-800-829-1040) and when prompted, selected option 1 for refund inquiries, then option 3 for direct deposit issues. Got connected to someone who knew exactly what I needed when I mentioned "indemnity letter for closed bank account." The rep was actually super helpful and walked me through everything. They took down my bank info, asked about the account closure reason, and confirmed my mailing address. Got my confirmation number on the spot and they said to expect the letter in 10-15 business days. Total call time was about 35 minutes including hold. Way less intimidating than I expected! Pro tip: have your last tax return handy because they might ask you to verify some details from it.

Thanks everyone for all the helpful advice! I'm feeling much more prepared now. I especially appreciate the specific menu options (1 then 3) and the tip about asking for the "Refund Inquiry" unit. Going to gather all my documents, pull up my tax return, and make the call first thing Monday morning. I'll definitely update this thread with how it goes in case others need to go through this process. Fingers crossed it goes as smoothly as some of your experiences! 🤞

Has anyone had success writing off health insurance premiums as a self-employed person? I'm paying so much out of pocket and I've heard conflicting advice about whether stylists can claim this deduction.

Welcome to the self-employment tax shock club! Your $6,700 bill is unfortunately very normal for your income level. Here's what's happening: you're paying both the employer AND employee portions of Social Security/Medicare taxes (15.3% total), plus regular income tax on your $37k net profit. A few things that might help for next year: - Set up quarterly estimated payments ASAP (due dates are Jan 15, Apr 15, Jun 15, Sep 15) - Consider maxing out a SEP-IRA or Solo 401k to reduce taxable income - Double-check you're capturing ALL legitimate deductions - travel to/from clients, professional magazines, even a portion of your phone bill if you use it for business The good news is you can usually set up a payment plan with the IRS if you can't pay it all at once. And now that you know what to expect, you can plan accordingly for 2025!

Has anyone actually done the math on whether cost segregation is worth it? I'm paying about $15k for a study on my $2M apartment building, and I'm not sure if the accelerated tax benefits are really worth the cost plus the hassle of all these depreciation questions.

Great question Dylan! I've been through this exact situation with multiple properties. The key thing to understand is that you DO have some control, but it's not as simple as just choosing how much to take each year. Here's what you can actually control: 1. **Bonus Depreciation Elections**: For each asset class identified in your cost seg study (5-year, 7-year, 15-year property), you can elect OUT of bonus depreciation on a class-by-class basis. This means instead of taking 80% bonus depreciation in 2025, you'd follow the regular MACRS schedule. 2. **Section 179 Elections**: You can also choose whether to take Section 179 expensing on qualifying property. 3. **Timing Strategy**: While you can't defer depreciation once you've established the method, you can make these elections strategically to spread the benefits. The important thing is these elections need to be made on your tax return for the year you place the property in service (or amend if you missed it). You can't just decide year-by-year how much to take - but you CAN structure it upfront to better match your income patterns. I'd definitely recommend working with a CPA who specializes in real estate taxation to model out different scenarios based on your specific income projections. The decision you make now will affect your taxes for years to come.