I actually DIY'd my Form 3115 last year for the exact same reason - switching from accrual to cash basis because of the 1099 mismatch headaches. It's definitely doable, but you need to be methodical about it. A few things that helped me: 1. **Timing is crucial** - You're cutting it close at mid-January, but it's still doable. Form 3115 must be filed with your timely filed return (including extensions), so you have until the tax deadline. 2. **The Section 481(a) adjustment calculation** - This was the trickiest part. You'll subtract your AR (since you already paid tax on income not yet received) and add your AP (expenses you haven't deducted yet but will pay). Don't forget about accrued expenses like utilities, rent, or other bills you owe but haven't paid. 3. **Documentation is key** - Pull your AR/AP aging reports from QuickBooks as of 12/31/2024 and keep detailed records. The IRS may ask for supporting documentation later. 4. **TurboTax handling** - Look for Form 3115 in the "Less Common Forms" section. The Section 481(a) adjustment flows through to your Schedule C automatically once you enter it correctly. 5. **Filing process** - E-file your return normally, then mail Form 3115 to the IRS National Office in Ogden, UT within a reasonable time. Include a cover letter referencing your e-filed return. The whole process took me about 6 hours spread over a weekend, but it was worth it to avoid the ongoing accrual headaches. Just take your time with the calculations and double-check everything.

I went through this exact same situation two years ago with my consulting business. The DIY approach for Form 3115 is definitely manageable if you're methodical about it, but there are a few critical details that can trip you up. First, your CPA's advice is solid - the steps he outlined are correct. However, I'd add a few things based on my experience: **Before you start:** Make sure you qualify for the automatic consent procedure. As a service business under $25M in gross receipts with no inventory, you should be fine, but double-check that you haven't made this change in the past 5 years. **The 481(a) adjustment calculation:** This is where most DIYers mess up. You need to be very precise about what counts. For your situation: - Subtract ALL AR as of 12/31/2024 (money owed to you that you already paid tax on under accrual) - Add ALL AP as of 12/31/2024 (money you owe for expenses you haven't deducted yet) - Don't forget accrued expenses like utilities, rent, or other bills **TurboTax specifics:** The Form 3115 is in the "Less Common Forms" section. When you enter your 481(a) adjustment, make sure you select whether it's positive or negative correctly. A negative adjustment (which you'll likely have) reduces your current year taxable income. **Filing logistics:** You CAN e-file your return with TurboTax, but you must also mail Form 3115 to the IRS National Office in Ogden, UT. Use certified mail and include a cover letter referencing your e-filed return. Do this within a few days of e-filing. Given that it's mid-January, you have time but shouldn't delay much longer. The form needs to be filed with your timely filed return. If you're organized and have clean books, plan on 4-6 hours total to complete everything properly.

Just FYI as a tax preparer, bring ALL your medical receipts to your appointment, not just COBRA. Many people forget about mileage to medical appointments (17 cents per mile for 2024), prescription costs, dental expenses, eye care, medical equipment, etc. Every dollar helps get you closer to that 7.5% threshold.

Great question about COBRA and taxes! Just wanted to add one important point that might help you save money - if you have any self-employment income from your freelance work, you might qualify for the self-employed health insurance deduction for your COBRA premiums. This is WAY better than the itemized medical expense deduction because it's an above-the-line deduction (meaning it reduces your AGI directly) and you can still take the standard deduction. Since you mentioned having 1099 income, definitely ask your tax preparer about this. The self-employed health insurance deduction lets you deduct health insurance premiums (including COBRA) as long as you have net self-employment income and you're not eligible for coverage through your spouse's employer plan. Given that you're both on COBRA, this could be a huge tax saver. For documentation, bring your 1099s showing the freelance income and all your COBRA payment records. The preparer can determine if this applies to your situation - it could potentially save you way more than trying to meet that 7.5% AGI threshold for itemized medical expenses!

Has anyone considered how the inherited IRA distributions might affect other tax situations like IRMAA surcharges for Medicare? My parents are dealing with this now and it's messing with their planning.

One thing that hasn't been mentioned yet is the timing strategy for your distributions. Since you're subject to the 10-year rule, you don't necessarily have to take equal distributions each year - you could potentially take larger amounts in years when your income is lower. For example, if you expect a lower income year due to job changes, sabbatical, or early retirement, that might be an optimal time to take larger distributions from the inherited IRA. This could help you avoid being pushed into higher tax brackets. Also, regarding your 529 plan question - while the inherited IRA distributions will be taxable to you, once that money goes into a 529 plan, it grows tax-free and withdrawals for qualified education expenses are also tax-free. So even though you can't avoid the initial tax hit, you're setting up tax-free growth for your kids' education expenses, which is still a solid strategy. You might want to run some projections showing different distribution scenarios across the 10-year period to see which approach minimizes your overall tax burden. The tools others mentioned here could help with that analysis.

I think everyone is overcomplicating this. If you're just selling a few items each month for a total of under $100 profit, the IRS honestly has bigger fish to fry. Millions of people have garage sales or sell used items without reporting every penny. As long as you're not making thousands or consistently growing this into a business, I wouldn't stress about it.

I appreciate everyone's detailed responses here! As someone who's been through this exact situation, I want to emphasize that even small amounts of income should be reported - it's not worth the risk of penalties later. The key distinction between hobby vs. business that Aliyah mentioned is crucial. Since you're actively buying items with the intent to resell for profit and doing this consistently each month, you're likely operating as a small business even without formal licensing. The IRS looks at your intent and activities, not just the dollar amounts. My recommendation would be to start treating this as a business now: keep detailed records of what you buy, sell, and any expenses (gas for thrift store trips, packaging materials, etc.). File Schedule C and take advantage of legitimate business deductions. Even at your current scale, proper record-keeping will save you headaches and potentially money on your taxes. Also, be aware that if you're selling through any online platforms, you might hit that $600 1099-K threshold sooner than you think when you factor in shipping costs that buyers pay you. Better to be prepared and compliant from the start!

@Chloe Martin Your strategy of using retirement contributions to get below the 0% threshold is brilliant! As someone who's done exactly this, I can confirm it works really well. I was in a similar situation last year - income of about $51,000 that put me just over the threshold. I increased my 401(k) contributions by an extra $200/month for the last few months of the year, plus maxed out my HSA. Between those two moves, I got my taxable income down to around $46,500, which gave me about $1,600 of room in the 0% bracket. I used that space to sell some Apple shares I'd held since 2020, saving me about $240 in taxes (15% of $1,600). The math worked out perfectly - the tax savings from the 0% capital gains treatment exceeded what I might have gained from having that extra money in tax-deferred accounts for just a few months. One tip: if you're going to try this strategy, make sure to calculate it early in the year so you can spread out those extra 401(k) contributions. I waited until October to figure this out and had to make some pretty large contributions in the last few months to hit my target income level. The HSA angle is especially smart since that money is triple tax-advantaged (deductible going in, grows tax-free, tax-free withdrawals for medical expenses). Definitely worth maxing that out first before increasing 401(k) contributions if you're trying to optimize your taxable income level.

This thread has been incredibly educational for someone just getting started with tax-advantaged investing! I'm a single filer making about $46,000 annually, and I've been holding some ETF positions for over a year that have appreciated nicely. What really opened my eyes was learning that capital gains stack ON TOP of your regular income rather than being calculated separately. I was definitely in the camp of people who thought my $46k salary left me with plenty of room in the 0% bracket, without considering how dividends and the gains themselves would fill up that "bucket." I've been tracking my quarterly dividend payments since reading this discussion, and I'm already at about $1,400 for the year from various index funds. So realistically, I probably only have around $700 of space left in the 0% bracket ($48,100 - $46,000 - $1,400 = $700). That's way less than I initially thought! The strategic retirement contribution approach that @Sofia Price mentioned is fascinating. I hadn't considered using my 401(k) contributions as a tool to optimize my taxable income for capital gains purposes. I'm already contributing enough to get my employer match, but increasing contributions to create more 0% bracket space could be a smart move. One thing I'm still wrapping my head around is the timing of everything. If I want to implement this strategy for 2025, should I be planning my increased retirement contributions now, or wait until later in the year when I have a better picture of my actual dividend income? The balance between locking in a strategy early vs. staying flexible seems tricky to navigate. Thanks to everyone who shared their real-world examples - this community is amazing for practical tax planning advice!