Thanks for mentioning this. I had no idea about quarterly payments. How do you actually make these payments? Do you just guess how much you'll make each quarter?

You make quarterly estimated tax payments using Form 1040-ES. You can pay online through the IRS website, by mail with a payment voucher, or through the IRS2Go app. As for how much to pay, you essentially estimate your annual income, calculate the tax on it, and divide by four for equal quarterly payments. If your income fluctuates throughout the year, you can make adjustments to each quarterly payment. Many self-employed people set aside about 25-30% of their cash income for taxes (including both income tax and self-employment tax) as a general rule of thumb, though your exact rate will depend on your total income and deductions.

Yes it could raise questions, but the alternative is worse. If you've received a 1099, the IRS already knows about that income. Not filing when they're expecting a return is a bigger red flag than filing for the first time. The audit risk is honestly pretty low for average income individuals. The IRS audits less than 0.5% of individual returns, and they're typically focused on high-income earners, people claiming unusual deductions, or returns with obvious errors. Just filing accurately now is your best protection.

Thats a really good point I hadn't considered. Did you end up getting special business insurance for your vehicle or is there some kind of rider they add to a personal policy?

I ended up getting what they call a "business use endorsement" added to my personal auto policy. It increased my premium by about 15%, but it properly covers me when I'm driving for business purposes. Some insurance companies offer specific business auto policies, but those are usually more appropriate for companies with multiple vehicles or employees driving for the business. For a sole proprietor like me who uses the same vehicle for both business and personal use, the endorsement was the more cost-effective option. Definitely worth calling your insurance agent to discuss your specific situation.

Is it better then to start using it for business immediately after purchase? Or does that create other issues? My accountant has me totally confused about this whole topic.

Can CPAs help with issues from prior year returns? I think I messed up my 1099-MISC reporting for a rental in 2023 and I'm worried about an audit.

Yes, CPAs can absolutely help with prior year issues. They can prepare amended returns (Form 1040-X) to correct mistakes from previous filings. For your 1099-MISC situation, they could review what you submitted and determine if an amendment is necessary. Many CPAs also offer audit representation if the IRS does question your return. Having someone who understands the tax code represent you during an audit can be extremely valuable, especially for rental property issues which tend to be scrutinized more closely.

I thought moving expenses weren't deductible anymore after the tax law changes? Was this for a military move or something special?

Thanks for this explanation! I do track inventory since I need to know how many pieces I have available to sell through my online shop. So if I understand correctly, since the seamstress is literally creating my inventory items, it would be more accurate to put this under Cost of Labor in Part III? Would this change anything about needing to issue a 1099-NEC to her at the end of the year?

Yes, since she's creating your inventory items and you're tracking inventory, Cost of Labor in Part III is the more accurate classification. This properly ties the expense to your product creation rather than treating it as a general business expense. Regarding the 1099-NEC requirement, that doesn't change at all. You still need to issue a 1099-NEC to any contractor you paid $600+ during the year, regardless of where you classify the expense on your Schedule C. The 1099 requirement is about who received the money, not how you categorize the expense on your tax return.

Speaking from experience, definitely get that W-9! I didn't get one from my contractor and then couldn't issue a 1099 properly, which flagged my return. Ended up paying penalties because of it. Such a simple thing but caused so much headache.

Thanks for the warning about the wait time! I just want to make sure - does filing an amendment increase my chances of getting audited? I've heard mixed things about this and it makes me nervous about filing one.

Filing an amendment doesn't inherently increase your audit risk. Amendments are actually quite common - millions are filed every year. What might increase scrutiny is the nature of what you're amending. Something simple like claiming a credit you qualified for but forgot is pretty straightforward. The IRS is more likely to look closely if there are dramatic changes to income or if you're suddenly claiming unusual deductions that weren't on your original return. For something like EITC that you legitimately qualify for, just make sure you have documentation of your income and meet all eligibility requirements.

I second FreeTaxUSA! It's what I've used for the past 3 years and it hasn't missed any credits I'm eligible for. It asks very specific questions about EITC. Plus it lets you go back and review every form before submitting so you can double-check everything.