Small business accountant here - here's a quick clarification that might help: COGS must always be reported separately from other business expenses, even when tiny. The tax consequences can be very different. If you report low/no COGS with significant sales, it's not automatically a red flag IF your business model logically explains the high profit margins. Many legitimate businesses have minimal COGS (digital products, certain services with product components, etc.

I'm in a very similar situation with my small online business! After reading through all these responses, I'm definitely going to start tracking my COGS properly even though the amounts are small. One thing I learned from experience - even if you think your costs are "too small to matter," the IRS really does expect to see COGS reported correctly on Schedule C. I made the mistake of lumping everything into regular business expenses my first year and got a notice asking for clarification. For anyone dealing with minimal documentation like yard sale purchases, I've found that keeping a simple log on my phone works great. I just note the date, general description ("misc household items from garage sale"), and total amount spent. It doesn't have to be perfect, but having something is way better than nothing if questions come up later. Thanks everyone for sharing your experiences - this thread has been super helpful for understanding how to handle this properly!

pro tip: if u cant get thru on the main line try calling your local taxpayer advocate service. they usually pick up faster

irs playing games with these pins fr fr 🤡

Is anyone else confused about whether closing costs affect the calculation? I sold my house and paid like $25k in realtor fees, title insurance, etc. Can I subtract those from my sale price before figuring out my gain?

Great question about the home improvements! I went through something similar when I sold my primary residence. You absolutely want to add those improvement costs to your basis - they can significantly reduce your capital gain. For the improvements you mentioned (roof and kitchen renovation totaling $42,000), those definitely qualify as capital improvements that increase your basis. Even if you don't have every single receipt, the IRS allows reasonable estimates for legitimate improvements. I'd suggest gathering whatever documentation you do have and making conservative estimates for anything missing. With your numbers: $425K sale price minus selling costs, minus your original $298K purchase price, minus $42K in improvements - you're likely looking at a gain well under the $250K exclusion (or $500K if married filing jointly). One tip: don't forget to include any selling expenses (realtor commissions, title fees, etc.) as they reduce your taxable gain too. TurboTax should handle the forms correctly, but definitely confirm you're reporting it as your primary residence sale to trigger the exclusion properly.

As someone who's dealt with multi-state tax issues for several years, I want to add a few practical tips that might help: First, start keeping a detailed work location log RIGHT NOW if you haven't already. I use a simple spreadsheet tracking date, location, and type of work performed. This becomes crucial evidence if any state questions your filing status later. Second, be aware that some states are getting more aggressive about auditing remote workers post-pandemic. I know people who got audit notices 2-3 years after filing, so proper documentation is essential. Third, if you're genuinely unsure about your filing requirements, consider consulting a tax professional who specializes in multi-state issues. The cost of a consultation is usually much less than the penalties and interest you'd face for filing incorrectly or not filing when required. One last thing - don't assume that just because your employer isn't withholding state taxes from a particular state that you don't owe them. Employers sometimes get this wrong, especially with remote workers. The withholding (or lack thereof) on your W-2 doesn't determine your actual tax obligation. The multi-state tax landscape is definitely complex, but with good record-keeping and the right resources, it's manageable. Better to be over-cautious than to get hit with unexpected penalties later!

One thing I haven't seen mentioned yet is the potential impact of state disability insurance (SDI) and other payroll taxes for remote workers. Even if you don't owe income tax to a state, you might still be subject to their payroll taxes if your employer is based there. For example, California has SDI tax that applies to all wages paid by California employers, regardless of where the work is performed. This is separate from income tax obligations. Similarly, some states have unemployment insurance requirements that follow the employer's location rather than where you work. I learned this the hard way when I discovered I owed California SDI tax even though I successfully argued I didn't owe California income tax as a remote worker. The rules are completely different and it's easy to overlook. If you're dealing with multi-state issues, make sure to research both income tax AND payroll tax obligations separately. Your payroll department might not be handling this correctly either - I've seen cases where employers weren't withholding required SDI but were withholding income tax they shouldn't have been. Also worth noting: some states are starting to require quarterly estimated payments for remote workers, especially if you're classified as an independent contractor rather than an employee. The requirements can be quite different from your home state's rules.

Whatever you do, DON'T ignore the notice! I made that mistake a couple years ago thinking it was a scam, and ended up with additional penalties and eventually had to deal with collections. The 30-day response window is really important. Also if you've moved recently, make sure to file Form 8822 to update your address with the IRS. I learned this the hard way when notices were going to my old address and I never received them.

I went through this exact same panic when I got my first CP2000 notice! Here's what I learned: First, verify it's legitimate by checking that all your personal info is correct and comparing it against what you have on file with the IRS. Real CP2000 notices will have your correct SSN, name, and address. Next, gather all your 2023 tax documents - your filed return, all 1099s, W-2s, and any other income documents. The most common cause of CP2000 notices is that a business or bank reported income to the IRS that didn't make it onto your return, or it was reported differently than expected. Don't rush to pay! Take the full 30 days to review everything carefully. If you find you did make an error, you can often set up a payment plan. If you believe the IRS is wrong, you can dispute it with documentation. Either way, responding within 30 days is crucial to avoid additional penalties. Consider consulting a tax professional if the amount is significant or if you're unsure about how to respond. Many will do a consultation for a reasonable fee and can help you navigate the response process properly.