Just want to add that if you're a "small business taxpayer" under the tax law (meaning under $26 million in gross receipts), you have ADDITIONAL inventory simplifications available. You can treat inventory as "non-incidental materials and supplies" which means you deduct them when used or consumed, not through formal COGS calculations. Publication 538 doesn't explain this super clearly, but the guidance in Revenue Procedure 2018-40 does.

This is exactly the kind of situation where the simplified rules for small businesses really shine! Since you're clearly under the $26 million threshold, you have several advantages that larger businesses don't get. One thing I'd add to the great advice already given - when you switch back to cash method, you might also want to consider the "materials and supplies" election under Section 1.162-3. This lets you deduct the cost of your wood, hardware, and finishing materials when you actually use them in projects, rather than having to track them as formal inventory with COGS calculations. The combination of cash method + materials/supplies treatment could be perfect for a custom furniture business. You'd record income when customers actually pay you, and you'd deduct material costs as you use them in projects. Much simpler bookkeeping than accrual with full inventory tracking! Just make sure when you file Form 3115 that you're clear about both changes - the accounting method change AND any inventory method changes. The IRS likes transparency about exactly what you're switching from and to.

Remember that if you're shutting down the business entirely, you'll need to file a final return. Make sure to check the box indicating it's a final return and include a statement explaining the closure. Don't forget to cancel any business licenses, permits, and close business accounts properly too. I learned the hard way that loose ends with a business closure can come back to haunt you years later!

One thing to consider that hasn't been mentioned yet - if you're selling the equipment to your brother (the former partner), this could actually be viewed more favorably by the IRS than selling to other family members. Since he was an original co-owner of the equipment through the partnership, there's already an established business relationship and legitimate reason for the transaction. Just make sure you have documentation from when he left the partnership showing how the assets were divided. If the partnership agreement or dissolution documents don't clearly address the equipment, you might want to create a written agreement now that references the original purchase and his departure from the business. Also, regarding the gain recognition - yes, you'll need to report it on Form 4797 as others mentioned, but the good news is that since this was Section 179 property, the recapture will be taxed as ordinary income (not capital gains), which actually keeps the reporting simpler even though the rate might be higher.

Quick tip - many states have marketplace facilitator laws now which means platforms like Etsy, Amazon, and eBay are required to collect and remit sales tax on your behalf regardless of whether you have nexus. This covers about 40+ states now. But be careful! If you sell on your own website or multiple channels, you still need to track your total sales across ALL platforms to determine nexus. The marketplace might handle collection for their platform sales, but they don't know what you're selling elsewhere.

As someone who went through this exact same confusion when I started my online business, I totally get your overwhelm! The good news is it's not as scary as it seems once you understand the basics. Since you're based in Arizona, you definitely need to collect sales tax there. For other states, you only need to worry about it once you hit their economic nexus thresholds (usually $100k in sales OR 200+ transactions per year in that state). Here's what I wish someone had told me when I started: 1. Check if Etsy is already handling sales tax collection for you in most states (they probably are!) 2. Keep detailed records of your sales by state - you'll need this info 3. Don't panic about registration until you actually hit thresholds 4. Consider using sales tax software once you start selling in multiple states The key is to stay organized from the start. I use a simple spreadsheet to track my monthly sales by state so I know when I'm approaching any thresholds. Most small businesses don't hit nexus requirements in multiple states right away, so you likely have time to figure this out properly. Focus on growing your business first - just make sure you're collecting Arizona sales tax and keeping good records. The rest will become clearer as your sales grow!

I had this issue last year and learned the hard way that issuing duplicate 1099s is a HUGE headache. One of my contractors got audited because Stripe reported $12,400 and I also reported $12,400 so it looked like they made $24,800 to the IRS. That contractor had to spend hours proving it was duplicate reporting.

This is exactly the kind of situation that trips up small business owners! I faced something similar with my landscaping business. Here's what I learned after consulting with my CPA: The golden rule is: never double-report the same payment. If Stripe is issuing 1099-NECs to your contractors (which they do for amounts over $600), then you should NOT include those payments on your own 1099s. Here's my recommended approach: 1. Log into your Stripe dashboard and check their tax reporting section - it should show you which contractors will receive 1099s from them 2. For QuickBooks, continue tracking everything for your own records, but when generating 1099s, exclude the Stripe payments that Stripe is already reporting 3. Only issue 1099s for Venmo payments (assuming you're using personal Venmo - if it's Venmo Business over $600, they'll also issue forms) I also keep a simple spreadsheet that breaks down each contractor's total payments by platform. This makes it crystal clear at tax time what needs reporting from me versus what's handled by the payment processors. The peace of mind is worth the extra record-keeping effort - trust me on this one!

I went through this same situation two years ago when I switched jobs mid-year. One important detail that hasn't been mentioned yet - make sure you get the corrective distribution processed before December 31st of the year following your over-contribution if possible. While you technically have until April 15th to request the return of excess, getting it done in the same calendar year can simplify your tax situation. The earnings on the excess contribution will be taxable in the year the distribution actually occurs, not necessarily when you originally made the over-contribution. Also, keep detailed records of all your communications with your plan administrator. I had to follow up multiple times before mine actually processed my request. Don't let them brush you off - you have the right to correct this error and they're required to help you do it properly. The good news is this won't trigger an audit as long as you handle it correctly. The IRS sees these corrective distributions all the time, especially during job change seasons.

This is such a stressful situation but you're definitely not alone! I dealt with a similar over-contribution issue when I switched jobs in the middle of last year. The key thing is to act quickly since you still have time to fix it properly. From my experience, your best bet is to contact the 401k plan administrator directly (not just HR) at your current employer where the excess contribution is sitting. Most major providers like Fidelity, Vanguard, or Charles Schwab have dedicated lines for these situations. When you call, specifically ask for a "corrective distribution" or "return of excess contribution" for 2025. They'll need to calculate not just the $1,500 excess, but also any earnings (or losses) on that amount from when it was contributed until when it's distributed back to you. This whole amount becomes taxable income for 2025, but you avoid the much worse 6% annual excise tax that kicks in if you don't fix it. Don't let your HR department's unhelpful response discourage you - the plan administrator is legally required to process these corrections and they deal with them regularly. Get it done before April 15, 2026 and you'll be in good shape!