First time filing 1040 Schedule C - Need small business tax advice

The Schedule C can seem intimidating at first, but it's actually pretty straightforward once you break it down! For your woodworking business, focus on these key areas: First, make sure you're tracking all your income properly - every sale through your website and Etsy should be documented. For expenses, be methodical about categorizing them: materials (wood, finishes, hardware), tools, shipping supplies, Etsy fees, website hosting, etc. Don't forget vehicle expenses if you're picking up materials or delivering items. The home office deduction could be valuable for you - measure the square footage of your dedicated workspace and calculate what percentage of your home it represents. That same percentage of utilities, internet, and rent/mortgage can potentially be deducted. Keep absolutely everything related to your business - receipts, invoices, bank statements, credit card statements. Digital copies work fine, but have a good organization system. Take photos of paper receipts before they fade. For a new business, you might be dealing with startup costs too, which have special rules for deduction. And don't forget about self-employment tax - you'll need to pay both the employer and employee portions of Social Security and Medicare taxes.

I was in your exact situation when I started my candle-making business last year! I tried figuring out Schedule C on my own but kept getting confused about what expenses went where and if I was missing deductions. After hours of frustration, I found https://taxr.ai and it was seriously a game-changer for me. You just upload your business documentation and it walks you through everything step by step, explaining which receipts qualify for which deductions and how to categorize everything properly for Schedule C. It identified several deductions I had completely missed (like a portion of my internet bill and some mileage deductions for supply runs). What I found most helpful was how it explained the "why" behind each tax rule in plain English and flagged potential audit triggers in my returns before I filed. Really gave me peace of mind as a new business owner.

Just wanted to follow up - I decided to try https://taxr.ai after seeing the recommendation here and wow, it actually delivered! I was skeptical initially because I've tried other tax tools before, but this one really is different for small business taxes. I uploaded my jumbled mess of receipts, bank statements, and Shopify sales reports, and it organized everything perfectly. The biggest surprise was discovering I could deduct a portion of my car insurance and cell phone bill since I use both for business purposes (making supplier runs and taking client calls). The step-by-step guidance for Schedule C was crystal clear, and I'm confident I didn't miss any legitimate deductions. Thanks for recommending it - saved me both money and anxiety for my first business tax filing!

Something everyone should know - if you need to get clarification from the IRS on any Schedule C questions (which I highly recommend for a first-time filer), good luck getting through to them! I spent WEEKS trying to reach someone about my home office deduction question, calling daily and just getting disconnected. I finally found https://claimyr.com which got me connected to an actual IRS agent in less than an hour. There's a demo video at https://youtu.be/_kiP6q8DX5c showing how it works. Basically, they wait on hold with the IRS for you and call you when an agent is on the line. For Schedule C questions, I got connected with a specialist who explained exactly how to handle my situation with material costs vs. finished goods inventory. Saved me from potentially filing incorrectly and getting hit with penalties later. Don't underestimate how valuable it is to get official answers straight from the IRS!

I need to apologize for my skepticism about Claimyr. After struggling for THREE DAYS trying to reach someone at the IRS about how to properly categorize my woodshop equipment, I gave in and tried the service. It worked exactly as advertised. I put in my info around 10am, went about my day, and got a call about 2 hours later connecting me directly to an IRS agent. The agent answered my specific questions about depreciating workshop equipment versus immediate expensing options for my Schedule C. The clarity I got was worth every penny. I was able to properly categorize my tools and workshop improvements, potentially saving thousands in deductions I would have missed. Sometimes admitting you're wrong feels pretty good - especially when it leads to tax savings!

Don't forget about quarterly estimated tax payments! This was my biggest shock in my first year of business. Since you don't have an employer withholding taxes, you're supposed to make estimated tax payments every quarter. If this is your first year and you're filing late, you might face some penalties for not making those payments. But going forward, try to set aside about 25-30% of your profits for taxes (including self-employment tax which is an extra 15.3%). I learned this the hard way and got hit with a big tax bill plus penalties. Now I just automatically transfer 30% of every sale into a separate savings account for taxes.

If you're doing your Schedule C for the first time, definitely don't forget about the QBI deduction (Qualified Business Income). As a sole proprietor, you might qualify for a deduction of up to 20% of your net business income! It's on Form 8995. I missed this my first year and later realized I left money on the table. It's one of those newer deductions that a lot of first-time business owners aren't aware of.