This is really helpful information everyone! I'm in a similar boat - been paying a TPA for years for my Solo 401k when my balance has been under $200k the whole time. Based on what I'm reading here, it sounds like I have a few options: 1. File one final 5500-SF marking it as terminated/final to avoid any IRS questions later 2. Just stop filing and deal with any potential inquiry letter (which sounds pretty manageable based on Cameron's example) 3. Keep filing even though I'm not required to, just for peace of mind I'm leaning toward option 1 - filing a final form and then stopping. Has anyone actually done this termination approach? What exactly do you check on the form to indicate it's your final filing? Also, for those who've used the EFAST2 system - do you need any special software or can you do everything through their web portal?

I went through this exact situation two years ago! I had been paying my TPA about $800/year for my Solo 401k when my balance was only around $180k. Like you, I felt like I was throwing money away. I ended up doing exactly what Sophia mentioned - filed one final 5500-SF with the "Final Return/Report" box checked. It was actually pretty straightforward once I got into the EFAST2 system. The hardest part was just getting over my initial nervousness about doing it myself. One thing I wish I had known earlier: you can actually request copies of your previous filings from the DOL to use as a reference. This helped me understand what my TPA had been submitting and made me more confident about filling out my final form correctly. Since then, I've had zero issues with the IRS. No letters, no questions, nothing. I've saved over $1,600 in TPA fees so far and honestly wish I had made the switch sooner. The peace of mind from properly closing out the filing history was definitely worth the small effort of doing that final form myself.

Just went through this exact same thing last month! I was super skeptical at first too but it's 100% legit. The key is making sure you're only using the official Chime app - don't click any links in emails or texts. I uploaded my 1040 and ID through the app and had my refund released within 48 hours. It's definitely becoming more common with all the tax fraud happening lately. Banks are just being extra cautious which honestly I appreciate even though it's a pain in the moment!

This exact thing happened to me with my refund about 2 weeks ago! I was totally panicked thinking it was a scam but it's completely legitimate. Chime has definitely ramped up their verification requirements lately - I think it's because of all the tax fraud and identity theft going around. I uploaded my 1040 and driver's license through the official Chime app (NOT through any email or text links!) and they released my funds in about 2 business days. Just make sure you're going through the app or logging into chime.com directly. Don't trust any random links or phone numbers. Once you submit the docs it's pretty quick though!

I've been dealing with this exact issue for years as a small business owner with an S-corp. The confusion is totally understandable because it does feel counterintuitive to reduce your cash when the money is still technically in your bank account. What helped me finally understand it was thinking about it this way: for cash basis accounting, you recognize expenses when you pay them, not when they clear your bank. The moment you write and mail that check, you've "paid" the expense from a tax perspective, even if the recipient hasn't deposited it yet. So on Schedule L, your cash balance should reflect what you actually have available to spend, not what your bank statement shows. Those outstanding checks represent money you can't use anymore - it's committed, even if it hasn't physically left your account yet. I made the mistake of putting outstanding checks on Line 18 for two years before my new accountant caught it. Had to file amended returns, which was a hassle I could have avoided. Definitely go with reducing Line 1 - it's the standard approach for cash basis S-corps and will keep you consistent with proper reporting.

As someone who's been through this exact scenario with my S-corp, I can confirm that reducing Line 1 (Cash) is definitely the correct approach for cash basis accounting. The key insight that helped me was understanding that Schedule L should reflect your true financial position at year-end - not just what your bank statement shows. I used to get hung up on the fact that the money was still "technically" in my bank account, but once I realized that those outstanding checks represent committed funds that I can no longer use for business operations, it made perfect sense to reduce the cash balance accordingly. One practical tip: keep good records of which specific checks are outstanding at year-end. This documentation will be helpful if you ever get questions during an audit, and it makes the following year's reconciliation much easier when those checks finally clear. The consistency is important too - whatever method you choose, stick with it year over year to avoid the complications that some others mentioned with amended returns. Since you're cash basis, reducing Line 1 is both technically correct and the most widely accepted practice among tax professionals.

Don't forget state implications when you move! I moved my business from Texas to Pennsylvania and got hit with all kinds of unexpected tax issues. Since ur moving states make sure ur looking at Michigan's rules about recognizing previous business losses from another state. Some states are super weird about it.

One thing to consider with your woodworking business restart - the IRS actually views legitimate business interruptions due to family emergencies (like your wife's illness) more favorably than businesses that just fail to turn a profit. This works in your favor for the hobby loss analysis. Since you're essentially starting fresh in Michigan, treat this as a business pivot rather than just a restart. Document your market research for the new location, any adjustments to your business model, networking efforts, and how you're leveraging your existing equipment investment in the new market. The IRS wants to see that you're making businesslike decisions to improve profitability. Also, regarding the LLC question - while the legal structure itself doesn't guarantee legitimacy, operating through an LLC with proper business formalities (separate bank accounts, business insurance, formal record keeping) can strengthen your overall business case. Just make sure you're actually following through with professional business practices, not just the paperwork.

This thread is super interesting. I'm doing a taxation course and we just covered this topic. One thing not mentioned yet is that some businesses have tried to work around 280E by separating their business into multiple entities - one that "trafficks" and another that provides other services. For example, a dispensary might create one business that only buys/sells product (subject to 280E but can deduct COGS) and a separate consulting/education business that provides advice to customers (not subject to 280E, so can deduct all ordinary business expenses). The IRS has challenged these arrangements with mixed results. Has anyone looked into the success rate of these types of structures?

This is such a great breakdown of a really confusing area of tax law! I'm actually a CPA and I still have clients ask me about this all the time, especially with the growth of state-legal cannabis businesses. One thing I'd add is that the COGS vs. other expenses distinction can get really murky in practice. For example, trimming labor for cannabis can sometimes be considered part of COGS (as it's part of preparing the product for sale) but sometimes it's treated as a non-deductible operating expense. The IRS has been inconsistent on where exactly to draw these lines. I've seen businesses spend thousands on tax attorneys just to figure out how to properly categorize expenses under 280E. It's one of those areas where the law is clear in theory but gets incredibly complex when you try to apply it to real-world business operations. The constitutional reasoning behind allowing COGS deductions is solid, but the practical implementation creates a lot of gray areas that businesses have to navigate very carefully.