Has anyone tried just ignoring sales tax compliance in states where you only have a few sales? What's the realistic chance of getting caught if you're a really small seller? I'm only doing about $50k in sales total across all states, with most sales in my home state.

I totally understand your frustration with the destination-based system - I went through the exact same confusion when I started my online business! The key thing that helped me wrap my head around it was realizing that sales tax is fundamentally about WHERE the consumption happens, not where the business operates. Think about it this way: if you walk into a physical store in California, you pay California sales tax regardless of whether that store's headquarters is in New York. The online world is just trying to replicate that same principle. The customer in California is using California's infrastructure (roads for delivery, legal system for consumer protection, etc.), so California gets the tax revenue. You're right that it's administratively burdensome for small businesses though. The good news is most states have "small seller exceptions" - you typically don't have to worry about collecting tax in a state until you hit either $100k+ in sales OR 200+ transactions in that state within a year. At your current volume, you might only need to register in a handful of states. I'd recommend doing a nexus analysis to see exactly which states you actually need to worry about. Many sellers think they have obligations in way more states than they actually do!

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!