Thanks for the reminder about Schedule SE! I actually did factor that in when I increased my withholding. I calculated roughly what I'd owe for both income tax and self-employment tax on the $18,500 and that's how I came up with the $320 per paycheck increase. Do you know if there's an easy way to check if I'm on track to meet the safe harbor requirement? I'm still a bit nervous about whether I've withheld enough.

You can use the IRS Withholding Estimator on their website. It will let you input both your W2 income/withholding and your 1099 income, then tell you if you're on track. Another simple approach is to look at your last paystub from 2024 and add up the federal withholding. Then add what you expect to have withheld for the rest of 2025 based on your current withholding rate. If that total is at least $16,300 (your tax from last year), you'll meet the safe harbor requirement.

But aren't you basically losing money by giving the government an interest-free loan? You could be investing that money throughout the year instead. I set calendar reminders for estimated payments and it's not that bad.

Your accountant is partly right, but timing is crucial. Recharacterization was an option before the tax filing deadline (including extensions) for the year of the contribution. For 2019 contributions, that deadline would have been around July-October 2020 (extended due to COVID). Since we're in 2025 now, recharacterization is no longer an option for 2019 contributions. The OP will need to go with the Form 5329 and penalty approach. But your suggestion is definitely good advice for anyone who catches their over-contribution more quickly!

That's a really good point I hadn't considered. I haven't calculated the exact earnings on the excess portion, but given market performance since 2019, it's probably significant. If I'm using the "absorption" method by under-contributing in 2021, do I still need to worry about the earnings issue? Or does that only apply if I'm physically removing the excess contribution?

If you're using the "absorption" method by under-contributing in a later year, you don't need to worry about withdrawing the earnings. The earnings stay in your Roth IRA and continue growing tax-free, which is actually a nice benefit! The earnings only become an issue if you physically withdraw the excess contribution. In that case, you'd need to calculate and withdraw the proportional earnings as well. Since you've already effectively "fixed" the excess through your 2021 under-contribution, you just need to file Form 5329 for 2019 and 2020 to pay the penalty for those years. The earnings can stay put in your account.

Is there a specific dollar amount where the IRS starts caring more about inventory vs supplies? I sell about $15k of products annually and have been lumping everything under supplies.

There's no specific dollar threshold where the IRS suddenly cares more about inventory vs. supplies classification. What matters more is your consistency and whether your method clearly reflects income. If you're selling $15k annually, you're still considered a relatively small business. However, if a significant portion of your business involves purchasing items for resale that you hold for any period of time, you should probably use inventory accounting. If you're concerned, consider talking to a tax professional about whether you should change your approach going forward.

I've never heard of Form 1125-A before. Is this something new for 2025? I've always just used the COGS section on Schedule C itself.

That's actually a good point I hadn't considered. I assumed my accountant had only filed the S Corp extension, but maybe there was confusion and they filed something for my personal taxes too? Though wouldn't that have shown up when I checked my IRS account online?

An extension request for your personal return typically wouldn't appear in your online account history the same way a filed return would. The IRS online account usually shows filed returns, not extension requests. Your accountant might have e-filed your extension without your knowledge thinking they were being helpful. However, that still doesn't explain the specific error code you received, which indicates an actual return was filed, not just an extension. If your accountant had filed an extension for you, you should still be able to e-file your actual return later. The fact that you got an "already filed" rejection strongly suggests either identity theft or a significant error, such as your accountant accidentally filing a return instead of an extension.

This is a hugely important point. Unemployment fraud and tax identity theft are closely linked now. You should check with your state unemployment office to see if there are any claims filed under your SSN that you didn't submit. If there are, you'll need to report that fraud to the state as well as to the IRS.

That's helpful to know! So he could adjust his withholdings temporarily through a properly calculated W-4, but not completely eliminate them for a week unless he actually qualifies for exempt status? This makes more sense as a legitimate approach.

Exactly! He can adjust withholding by submitting a new W-4 with carefully calculated numbers, but not eliminate it for just one week unless he truly qualifies for exempt status (which is rare). The proper approach would be to use the IRS Tax Withholding Estimator tool to figure out exactly how to complete the W-4 to get close to the amount he wants withheld. Then after that pay period, he should submit another W-4 to return to his normal withholding amount to avoid owing a large sum at tax time.

This is so true. I work at a tax prep office and see this mistake ALL THE TIME. People think they're just getting their money early, but forget the IRS wants penalties for underpayment. Plus, many don't save the extra money so they can't pay when the bill comes due.