This thread has been incredibly helpful! As someone who just started a small online jewelry business this year, I was completely lost on these forms. The explanations here really clarified that Schedule C is for my business income/expenses while Schedule A is for personal itemized deductions. One thing I'm still wondering about - I've been working from home and converted part of my spare bedroom into a workspace for making jewelry and photographing products. I've heard about home office deductions but I'm not sure if that goes on Schedule C or if there are special rules for it. Also, since I'm renting (not owning), does that affect whether I can claim any home office expenses? The separate bank account tip is gold - definitely doing that before the year ends. And the mileage tracking advice will save me from scrambling to recreate my business trips later!

This is such a helpful thread! I've been lurking here for a while as a new small business owner and finally decided to jump in. Started a tutoring service this year and was completely overwhelmed by all the tax forms. The way everyone explained Schedule C vs Schedule A really clicked for me - business stuff goes on C, personal deductions on A. Simple but I was definitely overthinking it before. One question though - for my tutoring business, I drive to students' homes and also meet some at coffee shops where I buy drinks during our sessions. Can I deduct both the mileage AND the coffee expenses on Schedule C? Or is there some rule about not being able to claim both travel and meals for the same business activity? Also loving all the organization tips here. Definitely setting up that separate business account this week!

Great question about depreciation! As someone who's been through this exact confusion, let me add a few practical tips that helped me navigate this maze. First, regarding your specific assets - the laptop ($1,850), furniture ($3,200), and software ($1,100) - Section 179 is likely your best bet since your total is only $6,150 and you have $42,000 in business income. This lets you deduct everything immediately rather than spreading it over multiple years. One thing I learned the hard way: make sure you have documentation showing when each item was "placed in service" for your business. The IRS cares about the actual date you started using it for business purposes, not necessarily when you purchased it. Also, don't forget about the "business use percentage" if any of these items are used partially for personal purposes. The laptop needs to be used more than 50% for business to qualify for Section 179, and you can only deduct the business-use portion. For record keeping, I created a simple spreadsheet with columns for: Item Description, Purchase Date, Cost, Business Use %, Section 179 Deduction Claimed, and Receipt Location. This saved me tons of headaches later. One last tip: if you're unsure about anything, consider getting at least a consultation with a tax professional for your first year. Business depreciation mistakes can be costly if the IRS comes knocking later!

@Keisha Robinson - Based on your situation, I'd strongly recommend going with Section 179 for all your equipment. With $42,000 in business income and only $6,150 in qualifying assets, you can deduct the entire amount this year and significantly reduce your tax liability. Here's a quick breakdown for your specific items: - Laptop ($1,850): Fully deductible under Section 179 (assuming >50% business use) - Office furniture ($3,200): Fully deductible under Section 179 - Software ($1,100): Fully deductible under Section 179 The immediate deduction will likely save you more in taxes this year than spreading the depreciation over 3-7 years, especially if you expect your income to grow in future years. For TurboTax, look for the "Section 179 Election" when you're entering your business assets. It should walk you through each item and let you choose the deduction method. Make sure you have your purchase dates and receipts organized - TurboTax will need the exact dates you started using each item for business. One important note: keep detailed records of when you "placed in service" each asset for business use, as this determines which tax year you can claim the deduction. Good luck with your return!

This is exactly the kind of confusion that happens when you're new to having employees! The good news is that since you only paid $270 for what sounds like a one-time gig, you're likely in a much simpler situation than you think. Based on what you've described - paying someone to help with your side business for a short period - this really sounds like independent contractor work rather than traditional employment. If you didn't control how or when they did the work and just paid them for completing a task, that's typically contractor territory. Since contractors only require a 1099-NEC if you pay them $600 or more in a year, your $270 payment probably doesn't trigger any federal filing requirements at all. No Form 941, no Form 944, no Form 940 - just keep the receipt as a business expense. However, if you're certain they were an employee (you controlled their work schedule, provided tools, etc.), then Ashley's advice about Form 944 vs 941 is spot-on. But honestly, I'd recommend taking a step back and really evaluating whether this was employee vs contractor work first. It could save you a lot of paperwork!

This thread has been super helpful for understanding the contractor vs employee distinction! As someone who's also navigating small business employment issues for the first time, I wanted to add that even if Miguel's situation turns out to be contractor work (which seems likely given the one-time nature and $270 amount), it's still worth understanding these Form 941/944 rules for future reference. One thing I learned recently is that the IRS has some really good resources on their website about worker classification - Publication 15-A has detailed examples that can help determine if someone is an employee or contractor. The "behavioral control," "financial control," and "relationship type" tests they outline are pretty straightforward once you understand them. Also, for anyone else reading this thread, state requirements can be different from federal ones. Some states have stricter rules about worker classification or lower thresholds for various tax filings, so it's always worth checking your specific state's requirements even if you're clear on the federal side. Miguel, definitely sounds like you're probably dealing with a contractor situation and can skip all the payroll tax headaches, but keeping good records of that $270 payment is still important for your business expense deductions!

I'm currently going through this exact same nightmare! Filed our S-Corp election in March and have been stuck in IRS limbo for months with no CP261. This thread has been incredibly valuable - it's both frustrating and reassuring to see how widespread this issue is. I'm planning to implement the multi-pronged approach that several people have had success with: filing Form 911 with TAS, sending a certified letter to Cincinnati, and using the strategic language tips when calling. The "entity determination" and "Entity Classification Election Acknowledgment" terminology suggestions are brilliant - I tried the entity determination approach yesterday and actually got transferred to someone more knowledgeable for the first time in weeks. One additional tip I learned from my tax attorney: when documenting your calls (which everyone should absolutely be doing), include the employee ID numbers if the representatives provide them. This can be helpful if TAS or Cincinnati needs to reference your previous attempts when working on your case. The success stories from Dmitry, Victoria, and others give me hope that persistence with multiple channels really does pay off. Starting my Form 911 application today and getting that certified letter ready for Cincinnati. Thanks to everyone who shared their experiences - this community support makes navigating this bureaucratic nightmare much less isolating!

I'm dealing with this exact same S-Corp election nightmare right now! Filed Form 2553 in February and have been stuck in the same endless loop of IRS phone transfers and non-responses for months. This thread has been absolutely invaluable - it's both maddening and comforting to see how widespread this CP261 issue is. Reading through everyone's experiences and solutions has given me the first real hope I've had in weeks. I'm definitely going to implement the multi-pronged strategy that multiple people have had success with: filing Form 911 with TAS, sending that certified letter to the Cincinnati office, and using the strategic calling approaches with "entity determination" language. The fact that people like Dmitry, Victoria, and others actually got resolution through these methods gives me confidence that persistence will pay off. One thing I wanted to add - my CPA mentioned that we should also consider requesting a transcript of our business account from the IRS, as sometimes S-Corp elections show up there even when representatives claim they can't find any record. You can request it through Form 4506-T or sometimes online through the Business Online Account system. Starting my documentation log today (wish I'd done this months ago!) and preparing my Form 911 application. Thanks to everyone who shared their stories and solutions - this community support makes navigating this bureaucratic maze so much more manageable!

Don't forget about the actual allocation process once you've got your total purchase price (including assumed debt)! The IRS is super picky about how you allocate across the 7 asset classes. You have to go in order from Class I to Class VII and you can't just randomly assign values. This matters because different classes get different tax treatment.

I went through this exact same situation when I bought a restaurant last year. The confusion about where to put assumed debt on Form 8594 is super common because the IRS instructions are terrible about explaining it clearly. What helped me understand it was thinking of it like buying a house with a mortgage - you're still "paying" the full purchase price even though part of it is debt you're taking on. In your case, you gave the seller $133k cash AND took on $42k in debt obligations, so your total consideration is $175k. The key thing that tripped me up initially was realizing that Form 8594 doesn't have a separate line for "debt assumed" - it just cares about the total purchase price and how you allocate that across asset classes. So you put $175k as your total consideration, then figure out how much of that $175k should be allocated to equipment (Class V), inventory (Class IV), etc. Make sure you keep good documentation of the debt assumption in your purchase agreement since that supports the $175k total if the IRS ever asks questions later.