This is exactly why I always double-check my Schedule C before filing! Your CPA definitely made an error here - COGS and supplies should absolutely be separated. For a craft business with inventory like yours, the $24,500 in materials should be in Part III (COGS) and the $5,300 in office/shipping supplies should be on line 22. While your tax liability is probably the same either way, proper classification matters for IRS compliance and industry benchmarking. I'd recommend having a conversation with your CPA about this - she should be willing to explain her reasoning or acknowledge the mistake. If she can't provide a good explanation, you might want to consider filing an amended return to get it properly categorized. Don't feel bad about questioning this - you're paying for professional service and have every right to understand how your return was prepared!

As a tax professional, I can confirm that your CPA made a significant error here. For any business that maintains inventory (which craft businesses definitely do), the IRS requires COGS to be reported in Part III of Schedule C, not lumped in with general business expenses. The $24,500 in inventory/materials should absolutely be in the COGS section because these are costs directly tied to the products you sell. The $5,300 in office supplies and shipping materials are legitimate business expenses that belong on line 22 of Part II. This isn't just a technicality - the IRS uses these classifications for compliance monitoring and industry analysis. A craft business showing $29,800 in "supplies" with zero COGS will likely trigger their automated screening systems because it doesn't match typical industry patterns. I'd strongly recommend asking your CPA to file a Form 1040X (amended return) to correct this classification. Any reputable tax professional should acknowledge this error and fix it at no additional charge since it was their mistake. If she pushes back or can't explain why she did this, you might want to consider finding a new preparer who better understands Schedule C requirements.

Something nobody's mentioned yet - if you're teaching regular classes, you might actually have BOTH self-employment income (the nanny work) AND employee income (the teaching) depending on how the community center classifies you. Check if they're giving you a W-2 or 1099. This matters because you calculate self-employment tax only on the self-employment portion. If you're getting a W-2 for teaching, they're already withholding Social Security and Medicare taxes for that portion of your income.

Great question about LLC vs sole proprietor! As someone who's been running a small tutoring business for 3 years, I can share what I've learned. From a tax perspective, a single-member LLC doesn't give you any additional deductions compared to sole proprietorship - you'll still file Schedule C either way. The real benefit of an LLC is liability protection, which might be worth considering since you're working with children and driving them around. If there's ever an accident or incident, an LLC can help protect your personal assets. For your vehicle expenses with that much business use, definitely keep detailed mileage logs. I use a simple notebook in my car and jot down the odometer reading, destination, and purpose for every business trip. The standard mileage rate is usually easier than tracking actual expenses, but run both calculations to see which gives you a bigger deduction. One thing I wish someone had told me earlier - make sure you're setting aside 25-30% of your self-employment income for taxes, including self-employment tax. It hits harder than expected if you're not prepared!

Pro tip: Go to your local tax office in person if you can. I did that last week and they helped me right away. Better than waiting on hold forever.

I went through this exact same thing last month! Had the same verification message for 7 weeks before it finally cleared. The key is definitely calling - I got through on my third try by calling right at 8 AM when they open. The rep told me that the verification process has been taking 6-8 weeks this year due to new fraud prevention measures, but once you hit that 6 week mark you can request an expedited review. They were actually really helpful and my refund was released 3 days after I called. Don't give up!

What tax software are people using to handle this kind of situation? I'm in a similar boat and tried using [popular tax software] but it seems confused when I enter both my home sale and stock losses.

Great question! Yes, you can definitely use capital losses from selling underperforming stocks to offset the capital gains from your home sale. The $3K limit you mentioned only applies when you have more losses than gains and want to deduct the excess against ordinary income - but when you're offsetting capital gains with capital losses, there's no limit. So in your case with $24K in taxable gains from the home sale, you could potentially sell stocks with $24K in losses to completely eliminate your tax liability on the home sale. Just a few things to keep in mind: 1. Make sure you understand the wash sale rule - don't repurchase the same or substantially identical securities within 30 days 2. Consider the holding period - long-term losses are most efficiently used against long-term gains (which your home sale likely is if you owned it over a year) 3. Double-check your home's cost basis calculation - don't forget to include qualifying home improvements which can reduce your taxable gain This strategy can be really effective for managing a large capital gains tax bill from a home sale!

Be careful about what information you share when you do get through. Last year I reached an agent who asked me for information I wasn't comfortable sharing over the phone. Turned out it was legitimate, but always verify you're actually speaking with the IRS before providing sensitive details. They will never ask for full bank account numbers or passwords.

I've had success using the callback feature! If you call 1-800-829-1040 and get put on hold, listen carefully - sometimes they offer a callback option where you can hang up and they'll call you back when it's your turn. I used this last month and got a call back in about 90 minutes instead of sitting on hold. Just make sure you're near your phone when they call back because they only try once. Also, double-check that your phone isn't blocking unknown numbers or the callback might not come through.