How do you actually prove inventory is "obsolete" though? Do you need documentation or can you just decide something isn't going to sell anymore?

You need to have a consistent method for determining when inventory becomes obsolete or has declined in value. This could be based on how long an item has been in stock (like items over 12 months old), items that haven't sold after multiple price reductions, or products that have been replaced by newer models. The key is documenting your process and applying it consistently. You can't just randomly decide something is obsolete when you want a tax deduction. Most businesses create a written inventory policy that explains their method for identifying and writing down obsolete inventory. If you're audited, the IRS will want to see that you followed this policy.

This! I learned this lesson the hard way my first year in business. Had a "profitable" year on paper but all the cash went to inventory growth. Still had to pay taxes on the profit even though my bank account was empty.

I've been looking into retirement options but wasn't sure which direction to go. With the Solo 401k, do you have to set that up before the end of the calendar year? Or can I still do that for 2025 taxes even if I'm filing in early 2026? Also, does it matter if I might hire a part-time assistant next year?

For a Solo 401(k), you must establish the plan before December 31, 2025, to make contributions for the 2025 tax year, though you can actually make the contributions up until your tax filing deadline (including extensions) in 2026. This is an important deadline distinction that trips up many self-employed people. Regarding hiring help, a Solo 401(k) works only if you have no full-time employees other than yourself and possibly a spouse. If you hire a part-time assistant who works less than 1,000 hours per year (about 20 hours per week), you can still maintain your Solo 401(k). If you anticipate growing beyond that, you might want to look into a regular 401(k) plan, though those come with additional administration requirements and costs.

I've done both and honestly the tax thing isn't as bad as I expected. The bigger shock was how many business expenses I didn't realize I could deduct! My effective tax rate ended up being similar, but I had to get used to paying quarterly estimated taxes instead of having it auto-withdrawn from a paycheck. The first year is a bit of a learning curve but after that it's smooth sailing. Just make sure you set aside 25-30% of every check you get!

Does a Currently Not Collectible status affect the 10-year period? I got placed in CNC status for a couple years when I was unemployed, and I'm wondering if that changed my CSED.

Currently Not Collectible (CNC) status does NOT extend the 10-year statute of limitations. This is actually one of the better options if you're trying to reach the end of the collection period, because the IRS stops active collection efforts while the 10-year clock continues to run. The main advantage of CNC is that unlike an installment agreement or Offer in Compromise, requesting CNC status doesn't extend the CSED. Many people don't realize this and end up requesting payment plans that add time to their collection period when CNC might have been a better option.

Actually, that's not entirely correct. The 10-year period is extended while the IRS is considering your installment agreement request, plus an additional 30 days - not just when you file the form. Also, there are very specific rules about when extensions happen with OICs and appeals. It's more nuanced than just calling and asking.

Hmm that's a really good point. I did get a promotion in August that bumped me from about $52k to the $58k range, so that could definitely be affecting things. Do you know if there's a good way to calculate the prorated amounts when your income changes mid-year?

You'll need to separate your income and withholding into two periods: before and after the promotion. For each period, calculate the annual equivalent of that income level (what you would have made if you'd earned that same amount all year), figure the tax on that annual amount, then prorate it for the number of months at that rate. For example, if you made $4,333/month ($52k/12) for 7 months, then $4,833/month for 5 months, you'd calculate: (Annual tax on $52k × 7/12) + (Annual tax on $58k × 5/12) = Your actual tax liability. Then compare your actual withholdings to this amount.

The IRS2Go app is really more for checking refund status than doing calculations. I'd recommend using the official Tax Withholding Estimator on the IRS website or something like FreeTaxUSA which lets you run scenarios for free.

Thank you for the specific calculation - that's really helpful! So if I'm understanding correctly, the issue is two-fold: my regular paychecks have too little withheld AND my bonuses should have 22% federal tax taken out but have zero instead? Would requesting the additional withholding on regular paychecks be enough to cover both problems?

Yes, your understanding is correct - you have two separate withholding problems happening simultaneously. Your regular paycheck withholding is likely calculated based only on your base salary, not accounting for the additional income from bonuses. And then your bonuses should have 22% federal withholding but have zero. The additional withholding I calculated would only cover the missing withholding from your bonuses going forward. You'll also need to address the underwithholding on your regular paychecks. I'd recommend talking to your payroll department first to get the bonus withholding fixed, then use the W-4 additional withholding to cover any remaining gap. You may also need to save some money to cover what's already been underwitheld so far this year.

This happened at my company too! When I brought it up to HR they got super defensive. I ended up comparing paystubs with colleagues and found out they were underwithholding for everyone. The company eventually had to send out an email explaining the "payroll configuration adjustment" but never admitted fault.

I never thought about it being deliberately misconfigured... that's concerning. I'll definitely ask around to see if my coworkers are experiencing the same thing. The company has been growing really fast so it could be an oversight, but either way I need to get it fixed. I appreciate everyone's advice - I'll update after talking to HR!