Is the 5-year thing a hard rule? I thought there was some flexibility if your business circumstances changed significantly.

There's no absolute 5-year "lock-in" rule, but the IRS generally won't allow you to terminate S status within 5 years without a legitimate business purpose. A significant change in business circumstances can qualify, but simple "tax planning" or "it was more work than I expected" usually won't be enough. The IRS is wary of businesses jumping back and forth between tax statuses purely to minimize taxes, so they put these restrictions in place. If you do want to terminate within 5 years, you'd need to file a letter requesting permission and explaining your circumstances.

Do you think the tax savings have outweighed the extra costs and hassle in your case? Would you do it again if you had the choice?

Any app recommendations for tracking mileage? I've been using a paper log but it's a pain.

I personally use MileIQ, but there are several good ones like Everlance and Stride. The key is finding one that automatically detects drives and lets you easily classify them as business or personal. Make sure whatever app you choose lets you export detailed reports that include start/end locations, odometer readings, and business purpose. The app I mentioned even lets you add notes for each trip which is super helpful if you get questioned about specific drives later. Most have free versions that work fine if you don't drive tons of miles.

Thanks, you're right - I do get a 1099-NEC that includes everything (services + mileage all together). So based on what you're saying, I should be able to deduct the full mileage at the standard rate since I'm paying taxes on the entire amount, including what was meant as "reimbursement"?

Yes, that's exactly right. Since your 1099-NEC includes both your service payments and mileage reimbursements as one lump sum, the IRS considers it all taxable income. Therefore, you are absolutely entitled to deduct all your business mileage at the standard rate on your Schedule C. Just make sure your mileage log is detailed and accurate to support your deduction if you're ever questioned. Include dates, destinations, business purpose, and mileage for each trip.

Do you know if the AGI has to be exactly right? Like if my AGI was $48,296.75, would I enter 48296 or 48297? Or would I use cents too somehow?

You only need to enter the whole dollar amount without cents. So if your AGI was $48,296.75, you would just enter 48296. This is one of the most common mistakes people make. The system only asks for 5 digits though, which means if your AGI has more than 5 digits (like in your example), you'll need to enter all of them - not just 5 digits. The "5-digit" terminology is confusing because it's really asking for your Self-Select PIN if you created one, or your AGI if you didn't.

This worked for me too! I had a really low income year in 2022 and my AGI was actually negative. I kept trying different numbers until I finally just entered "0" and my return was accepted.

Thanks for the straight talk. I know I messed up big time. Do you think being in Canada offers any protection, or does that actually make it worse? And roughly what percentage of the collected amount would penalties typically be?

Being in Canada doesn't protect you - it potentially complicates things. US states can work with Canadian authorities, plus they can go after your US assets including marketplace accounts/funds. eBay and other platforms also comply with tax authorities when legal action is involved. Regarding penalties, it varies by state, but for intentional fraud (which is what this would be classified as), you're typically looking at: - 100% of the tax collected - Interest (varies by state, typically 4-10% annually) - Fraud penalties (50-100% of the tax amount) - Possibly collection fees and other costs So worst case, you could be looking at 2-3 times the amount you collected. With voluntary disclosure, you might get the fraud penalties waived, which would be huge. But you'd almost certainly still owe the base tax amount plus interest.

That used to be the case, but it all changed after the South Dakota v. Wayfair Supreme Court decision in 2018. Now states can require remote sellers (including international ones) to collect sales tax once they pass certain economic thresholds - usually around $100k in sales or 200 transactions. So if OP was selling enough to US customers in specific states, they would legally be required to collect and remit sales tax to those states, even though they're physically located in Canada.

I haven't tried Stride - does it integrate directly with any tax filing software? The project-based spreadsheet approach is interesting too. How time-consuming do you find it to maintain throughout the year?

Stride generates tax reports you can download, but doesn't directly integrate with filing software like TurboTax. You'll still need to transfer the info, but at least it's all calculated and organized. The spreadsheet takes me about 10 minutes a week to maintain. I just update it every Friday with that week's expenses and receipts. The key is consistency - if I wait more than a week, it becomes a pain to remember details. The project-based approach has actually helped me adjust my pricing too, since I can see exactly how much each type of shoot costs me in expenses.

I was literally about to comment about my receipt shoebox system! But seriously, I switched to Expensify last year and it's way better than my old "system." The receipt scanning feature saves so much time, and it's actually pretty accurate at pulling the data.