I'm just getting started with my small handmade jewelry business and this thread has been incredibly helpful! I was having the exact same worries about my EIN classification. When I applied a few weeks ago, I selected "retail sales" since I'm selling my pieces at local craft markets and through social media, but then I started second-guessing myself because I'm actually making everything from scratch - wire wrapping, beading, soldering simple connections. Reading through everyone's experiences here is such a huge relief! It's reassuring to know that so many other creators went through this same classification anxiety and that it doesn't actually impact what I can deduct. I've been carefully tracking all my material purchases - sterling silver wire, gemstone beads, findings, tools - but wasn't sure how to categorize them come tax time. Based on all the advice shared here, it sounds like my materials should go under Cost of Goods Sold since I'm transforming them into finished jewelry pieces for sale. The tips about keeping detailed records and tracking which materials go into each piece are really valuable too - I'm definitely going to be more systematic about documenting my material usage. Thanks to everyone who shared their real-world experiences! This kind of practical knowledge from actual small business owners is exactly what newcomers like me need to hear. Now I can focus on growing my business instead of worrying about whether I messed up some paperwork!

I'm so glad I found this thread! I just started my small custom sticker business and was having the exact same concerns about my EIN classification. When I applied last month, I went with "printing services" since I'm designing and printing custom stickers, but then I started wondering if I should have selected "retail sales" since I'm selling directly to customers online and at local events. This whole discussion has been incredibly reassuring! It's such a relief to hear from so many other small business owners who went through the same classification confusion and that it doesn't actually limit what I can deduct. I've been tracking all my material costs - vinyl sheets, transfer tape, printer ink, cutting blades - but wasn't sure how they'd be categorized for tax purposes. Based on everyone's advice here, it sounds like my materials should go under Cost of Goods Sold since I'm converting raw materials into finished stickers for sale. The emphasis on detailed record keeping is really helpful too - I'm going to start being more systematic about tracking which materials go into each order. Thanks to everyone who shared their experiences! This kind of real-world knowledge from actual business owners is exactly what newcomers need to hear. Now I can stop worrying about the paperwork and focus on growing my sticker business!

One thing nobody has mentioned yet - the self-employment tax might seem painful now, but remember half of it is deductible on your federal return. Also, paying self-employment tax means she's building Social Security credits for retirement. If she consistently avoids self-employment tax by using Schedule 1 incorrectly, she could find herself with reduced Social Security benefits in retirement. Plus, proper Schedule C filing allows her to deduct legitimate business expenses related to her athletic activities - equipment, travel to events, training costs, etc. This can often offset a significant portion of the self-employment tax burden.

Based on all the great advice here, it sounds like you definitely need to file your sister's 1099-NEC income on Schedule C with self-employment tax. I went through something similar with my freelance graphic design work - my accountant initially suggested Schedule 1 to "save money" but after doing more research, I realized that was completely wrong. The fact that your dad filed it incorrectly last year and didn't get caught doesn't mean it was right - as Miguel mentioned, the IRS often catches these things later with automated matching. Better to file correctly now than deal with penalties and back taxes later. One practical tip: make sure to track all her business expenses related to her athletic activities throughout the year - training equipment, travel to competitions, coaching fees, etc. These deductions on Schedule C can really help offset that self-employment tax burden. I wish I had started tracking my business expenses earlier!

Use TurboTax or FreeTaxUSA - they make it super easy to enter even tiny W-2s like this. Takes maybe 2 minutes and saves all the worry. I had a similar situation with a $45 W-2 last year and just entered it to avoid any headaches.

Just to add another perspective - I work in payroll and can confirm that employers are required to issue W-2s for any amount of wages paid, even if it's just $24.50. The lack of federal tax withholding is completely normal for such a small amount - the withholding tables are designed so that very low earnings don't trigger federal income tax withholding. However, as others have mentioned, you absolutely should report this income. The IRS receives copies of all W-2s electronically, and their automated matching system will flag your return if there's a discrepancy. Even though the actual tax impact might be zero (depending on your total income), omitting it could trigger correspondence that's way more hassle than just including it. Pro tip: If you're using tax software, it will automatically calculate whether this small amount actually affects your tax liability. In many cases, it won't change what you owe or your refund amount, but reporting it keeps you compliant and avoids potential issues down the road.

did the exact same thing happen to your federal withholding too? or just state? because different states have different withholding rules that don't always match the federal changes

This is frustrating but totally makes sense now that I'm reading everyone's experiences! I had a similar issue where my withholding seemed way off after getting a raise. One thing that really helped me understand what was happening was looking at my year-to-date withholding on each paystub throughout the year - you can actually see when the withholding rate changed and whether it was keeping pace with your income increase. The midyear raise explanation really resonates with me. When payroll systems calculate withholding, they're essentially projecting your annual income based on your current pay rate. So if you got a raise in August, the system might have been calculating as if you were making your pre-raise salary for the whole year during the first 8 months, then suddenly switched to calculating as if you'd been making the higher salary all year long. For next year, definitely submit a new W-4 form to your employer. You can use the IRS withholding calculator on their website to figure out exactly how much extra you should have withheld each paycheck to get back to that $1,600-1,900 refund range you're used to.

You might also want to consider filing a complaint with your state's Department of Labor if your former employer is still dodging their responsibilities. Many states require employers to provide W-2s even after closing, and some have penalties for failing to do so. In the meantime, definitely go with Form 4852 as others have suggested. One tip that helped me in a similar situation: if you remember your hourly rate or salary, multiply that by the hours/months you worked to get your gross wages. Then use online tax calculators to estimate what would have been withheld based on your income level and filing status. Also keep any emails or documentation showing you tried to get the W-2 from your employer - this proves you made good faith efforts to get accurate information, which the IRS appreciates if they ever have questions. Don't let this stress you out too much. The IRS deals with these situations regularly, especially with all the business closures in recent years.

I went through almost exactly this situation two years ago when my company suddenly folded. The fact that your wages aren't showing up on your IRS wage transcript is a dead giveaway - they definitely never submitted your W-2 information despite their claims. Here's my step-by-step advice based on what worked for me: 1. **File Form 4852 immediately** - Don't wait any longer since your extension deadline is approaching. This substitute form is specifically designed for missing W-2 situations. 2. **Gather whatever evidence you have** - Even if it's just bank deposit records showing your net pay, work emails mentioning your salary, or anything that helps establish what you earned. 3. **Be methodical with your estimates** - I used my final pay stub (luckily I had one) to calculate my year-to-date totals. If you don't have that, work backwards from your known salary/hourly rate and time worked. 4. **Document everything** - Keep records of all your attempts to contact the employer, any responses you got, and how you calculated your estimates. The IRS wants to see you made good faith efforts. 5. **Don't panic about perfect accuracy** - The IRS understands these situations happen. As long as your estimates are reasonable and well-documented, you should be fine. The key thing is just getting your return filed before the October deadline. You can always amend later if more accurate information becomes available. Good luck!