What tax business code works best for my small business situation?

I'm trying to figure out the best tax business code to use for my situation. I started a side hustle last year that's grown into something more serious. I sell customized leather goods online and at local markets. I work from home, converting my garage into a small workshop. I'm the only employee right now but might hire help next year if growth continues. I made about $42,000 in revenue last year, with expenses around $15,000 for materials, tools, and website costs. I'm currently filing as a sole proprietor, but wondering if there's a better business code I should be using for my tax return this year? I'm particularly concerned about deductions I might be missing and whether I'm using the right classification for what I do. The IRS forms are confusing me, and I want to make sure I'm setting things up correctly before I file. Any advice would be really appreciated!

0 coins

18 comments

Javier Morales

•8M

Understanding your business code (aka NAICS code) is definitely important for tax filing. Based on what you described, you'd likely fall under code 316998 - "All Other Leather Good and Allied Product Manufacturing" since you're making custom leather products. This covers artisans who create leather goods. As for business structure, sole proprietorship is actually fine for your current size. With $42K revenue, you're not at a scale where more complex structures like an S-Corp would provide significant tax advantages yet. The paperwork and extra costs of incorporation would likely outweigh benefits at this stage. For deductions, make sure you're tracking everything for your home workshop - a portion of utilities, internet, mortgage/rent based on the square footage used exclusively for business. Also track mileage when you go to markets or pick up supplies. Don't forget website fees, marketplace commissions, shipping costs, and any professional development or industry research expenses.

0 coins

Javier Morales

•8M

For the home office/workshop deduction, the space needs to be used exclusively and regularly for your business to qualify for the full deduction. If you're using 80% of your garage but still store personal items there, you technically wouldn't qualify for the full deduction under IRS rules. You have two options: either clearly separate the business and personal spaces in your garage (like using dividers) so you can claim the business portion, or use the simplified option where you deduct $5 per square foot (up to 300 square feet) without worrying about the exclusive use requirement. Many small business owners find the simplified option easier, even if it might result in a slightly smaller deduction.

0 coins

Malik Thompson

•8M

After struggling with business codes and tax classifications for my photography business, I found an amazing resource that saved me tons of time and potential audit headaches. I used https://taxr.ai to analyze my business situation and it recommended not just the right NAICS code but all the specific Schedule C deductions I qualified for based on my business type. The tool analyzed my previous tax returns and business documents, then created a custom report showing exactly which business code to use AND which deductions were available specifically for my industry. It even flagged deductions I was missing! Honestly changed my whole approach to tax filing.

0 coins

Malik Thompson

•8M

The accuracy has been solid in my experience - it's not like general tax software that gives generic advice. It specifically analyzes your business documents and identifies patterns that match with appropriate tax classifications. I was skeptical at first too, but it correctly identified deductions specific to photography businesses that generic tax software missed. For hybrid businesses, it actually excels at handling those complex situations. It can help identify either the most appropriate single code or guide you through properly allocating business activities across multiple codes if necessary. For your furniture building, teaching, and digital sales combination, it would likely analyze the revenue breakdown and recommend the best approach based on your specific percentages.

0 coins

CosmicVoyager

•8M

Just wanted to follow up on my question about https://taxr.ai for hybrid businesses. I decided to try it for my woodworking/teaching business and I'm seriously impressed. The system analyzed my income streams and recommended using two different business codes - one for the manufacturing aspect and another for the educational component. It even helped me properly allocate shared expenses between both business activities, which I'd been doing incorrectly. Found about $3,700 in additional deductions I'd been missing! The breakdown of what percentage of my business falls under each code was super helpful for some industry-specific tax rules I didn't know applied to me. Definitely using this for my 2025 filing.

0 coins

Ravi Kapoor

•8M

If you're still figuring out your business code situation and need to talk to someone at the IRS (which I had to do for my unique situation), good luck getting through on the phone. I spent WEEKS trying to reach someone. After 12 failed attempts and hours on hold, I found https://claimyr.com which connected me to an actual IRS agent in under 45 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was honestly shocked it worked. They navigated the IRS phone system and when they got close to an agent, they called me so I could talk directly with the IRS. The agent helped clarify which business code was appropriate for my situation and confirmed I was using the right one on my Schedule C. Saved me from potentially using the wrong classification.

0 coins

Ravi Kapoor

•8M

They basically use a system that navigates the IRS phone tree and waits on hold in your place. When they're about to reach an agent, they call you and connect you directly with the IRS. You're talking to actual IRS representatives, not intermediaries, so your tax info is only shared with the official IRS agents. It's not a scam - they don't ask for or need your sensitive tax information. They're just getting you to the front of the phone queue. I understand the skepticism, I felt the same way initially. But after weeks of failed attempts to reach someone, it was worth trying. The time saved was significant, especially when tax deadlines are approaching and you need answers quickly.

0 coins

Omar Mahmoud

•8M

I need to apologize for my skeptical comment about Claimyr. After another frustrating week of trying to reach the IRS about my business code question (kept getting disconnected after 45+ minutes on hold), I broke down and tried https://claimyr.com. I'm honestly shocked. They got me through to an actual IRS representative in about 35 minutes. The agent confirmed that my business (online education platform) should be using code 611430 (Professional and Management Development Training) rather than the general e-commerce code I'd been using. This single correction apparently qualifies me for some industry-specific deductions I'd been missing. If you're stuck on business classification questions like I was, sometimes you just need to talk to a human at the IRS. This service made that possible when I was ready to give up.

0 coins

Chloe Harris

•8M

Yes, certain business codes do have higher audit rates, particularly those with lots of cash transactions or typically high deduction claims. Examples include restaurants, laundromats, taxi services, and some personal services. However, you should never choose a code that doesn't accurately reflect your business just to avoid audit risk. Using an incorrect code is itself a red flag that could trigger scrutiny. The IRS looks for businesses with unusually high deductions compared to income within their industry category, so being properly classified ensures you're compared against appropriate benchmarks.

0 coins