Just FYI - if you do end up filing 1040-X for the inventory error, expect it to take FOREVER to process. I filed an amended return last April for a similar issue and it took 9 months to get my refund. The IRS is insanely backlogged still.

I went through almost the exact same situation with my small eBay business last year! You're absolutely right to be concerned, but the good news is this is totally fixable. First, let me echo what Mateo said - when you overstate ending inventory, you're actually overstating your profit, which means you likely OVERPAID taxes rather than underpaid. The math works like this: higher ending inventory = lower cost of goods sold = higher reported profit = more taxes owed. For your situation with the $3,700 difference ($5,800 vs $2,100), I'd definitely recommend filing Form 1040-X to amend your 2021 return. With that size difference, you're probably looking at a decent refund. The process isn't too complicated - just recalculate your Schedule C with the correct ending inventory figure and file the amended return. A few tips from my experience: - Keep detailed documentation of how you determined the correct $2,100 value - Include a clear explanation with your 1040-X about the inventory valuation error - Going forward, stick with cost basis for inventory valuation - it's much simpler and more defensible than trying to estimate fair market value The IRS won't penalize you for an honest mistake that resulted in you overpaying. If anything, they owe YOU money! Just be prepared for the amended return to take several months to process.

dont forget to file FBAR if u have foreign bank accounts with more than $10,000 combined at any point during the year!!!! this is separate from tax return and has a diffrent deadline (april 15 with automatic extension to oct 15). penalties r crazy high if u dont file this

I went through this exact same situation last year! As an F1 student, you're definitely still in your exempt period since you've only been here 18 months. The 5-year exemption clock starts from your first entry to the US on F1 status, not from when you complete 5 full years. A few important things to remember: - File Form 1040NR (nonresident alien return) - Don't forget Form 8843 to claim your exempt status - this is required even if you have no income - Your on-campus work income is taxable, but make sure to check if your country has a tax treaty with the US for potential benefits - Scholarship money for tuition/required fees is generally not taxable, but amounts for room/board are Since you mentioned being confused by conflicting info online, I'd recommend reaching out to your university's international student services office - they usually have tax workshops specifically for F1 students during tax season. Also, many universities offer free tax preparation assistance through VITA programs that are trained on international student situations. The key thing is don't stress too much - you're still well within the exempt period and have clear guidance on filing as a nonresident alien!

Don't stress too much about the audit risk. The IRS expects new businesses to have losses in the beginning. I've had losses for my pottery business for 2 years and finally turned a profit in year 3. Never got audited. Just make sure your expenses are actually business-related and reasonable. Like don't try claiming a full spa day for yourself as "research" lol. That's the kind of thing that raises flags.

Great question! I'm also a service-based business owner (freelance graphic design) and went through this exact same situation in my first year. You definitely need to file Schedule C even with a loss - but like others mentioned, that loss actually works in your favor by reducing your overall tax burden from your W-2 income. One thing I learned the hard way is to make sure you're categorizing your startup costs correctly. Some of those certification courses and equipment purchases might need to be depreciated over multiple years rather than fully deducted in year one, depending on the amounts. The IRS has specific rules about startup expenses over $5,000. Also, since you're doing both employee work and self-employment, you'll still owe self-employment tax on your $11,400 of business income (even though you had a net loss after expenses). It's about 15.3% on that income, but you can deduct half of that SE tax as an adjustment to income. Keep those detailed records you mentioned - they're your best protection. The "hobby loss rule" only becomes an issue if you show losses for multiple consecutive years without demonstrating you're genuinely trying to make a profit. One year of losses is totally normal and expected for a new business!

Can someone please explain the difference between the American Opportunity Credit and the Lifetime Learning Credit on Form 8863? I have two kids in college and I'm not sure which one to use for each of them.

Actually, I want to clarify something important about your original calculation. The computer expense might not qualify depending on the specifics. For the American Opportunity Credit, computers and software only count as qualified expenses if they're required for enrollment or attendance by ALL students in the course of study - not just helpful or recommended. If the computer was just something you bought to help her with schoolwork but wasn't specifically required by the school, then your calculation would be: $7,500 (tuition) - $3,250 (scholarship) = $4,250 in qualified expenses. Also, make sure to check if any portion of that merit scholarship was designated for specific non-qualified expenses like room and board. If the scholarship terms allow flexibility in how it's used, you might be able to allocate some of it to living expenses (making that portion taxable to your daughter) while preserving more tuition expenses for the education credit. This strategy often results in a better overall tax outcome, especially if your daughter has minimal other income. I'd recommend reviewing the scholarship award letter and your daughter's 1098-T form carefully to see exactly what options you have for optimizing this calculation on Form 8863.

Went through this last year and what worked for me was calling the Taxpayer Advocate Service. They're an independent organization within the IRS that helps when you're having financial difficulties or when the normal IRS channels aren't working. They assigned me an advocate who helped review my reconsideration request before I submitted it and even followed up with the IRS for me. Completely free service too. Google "Taxpayer Advocate Service" + your state to find your local office.

I went through the same struggle a few months ago and ended up combining several approaches mentioned here. First, I used the IRS publication that Ethan linked - it really does give you the framework even without an exact template. Then I contacted the Taxpayer Advocate Service like Carmen suggested, and they were incredibly helpful in reviewing my draft and making sure I addressed all the specific points from my audit notice. The key thing I learned is that organization matters more than perfect writing. I created a simple table that listed each disputed item from the audit in one column, my response/explanation in the middle column, and the supporting document reference in the third column. This made it crystal clear for the IRS reviewer to follow my logic. One tip that really helped: I started each paragraph addressing a disputed item with "Regarding [specific line item from audit notice]..." and ended each section with "See attached Exhibit [letter]." This kept everything focused and easy to follow. The whole letter ended up being about 1.5 pages, but it was backed up by well-organized exhibits. Don't let the formal writing intimidate you - clear, factual communication is what they're looking for, not fancy language. Good luck!