One additional strategy worth considering is implementing an Employee Stock Ownership Plan (ESOP) if your retail business has sufficient value and cash flow. While more complex than the other options discussed, ESOPs can provide massive tax deferrals and even permanent tax avoidance on the sale proceeds if structured properly. For a less complex approach, consider maximizing your HSA contributions if you're on a high-deductible health plan. For 2025, you can contribute $4,300 for individual coverage or $8,550 for family coverage (plus $1,000 catch-up if over 55). While the amounts aren't huge compared to retirement plans, every bit helps when you're in the phase-out range. Also, if you're doing any business travel or have a home office, make sure you're maximizing those deductions. The home office deduction can be particularly valuable for S-corp owners - you can either take the simplified method ($5 per square foot up to 300 sq ft) or actual expense method if you have significant home office costs. Finally, consider income shifting through family partnerships or gifting business interests to adult family members in lower tax brackets, though this requires careful structuring and ongoing compliance. The key is finding the right combination of strategies that work for your specific situation while staying well within IRS guidelines.

Another approach that might help with your QBI situation is exploring captive insurance company strategies if your retail business has sufficient income and risk exposure. While more sophisticated than traditional retirement plans, captives can allow you to deduct up to $1.2 million annually in premiums while building tax-deferred wealth. For a simpler immediate strategy, consider accelerating any business loan payments or prepaying business expenses like insurance, rent, or supplier agreements if you have the cash flow. These prepayments can create legitimate business deductions in the current year while providing operational benefits. Also, don't overlook equipment leasing versus purchasing decisions. If you need new fixtures, POS systems, or delivery vehicles, structured leases might provide better current-year deductions compared to depreciation schedules, especially with the reduced bonus depreciation percentages for 2025. One often-missed opportunity: if your retail business involves any intellectual property (proprietary processes, customer lists, brand development), consider whether those assets should be held in separate entities and licensed back to your operating company. The licensing fees create deductions for the S-corp while potentially qualifying for different QBI treatment. The key is layering multiple strategies rather than relying on just one approach. Given that you're already maxing retirement contributions, combining several smaller strategies (HSA, home office optimization, expense timing, equipment decisions) can collectively move you back into the favorable QBI range.

Has anyone used QuickBooks Online for handling the accrual method with unshipped inventory? I'm struggling with the same issue as OP.

I'm a newcomer here but dealing with a very similar situation! I've been researching the accrual method switch for weeks and this thread has been incredibly helpful. One thing I'm still confused about - when you're tracking inventory only at the beginning and end of the year (not quarterly), how do you handle COGS throughout the year? Do you estimate it based on purchases, or do you wait until year-end to make adjustments? Also, for those who mentioned Form 3115, is there a specific deadline for filing it when switching methods? I want to make sure I don't miss any important timing requirements. The deferred revenue approach makes total sense for unshipped orders. I'm definitely going to implement that in my QuickBooks setup. Thanks everyone for sharing your experiences!

Great thread with lots of helpful info! I wanted to add one important point about record-keeping that might help others in similar situations. Even if you've lost original receipts, the IRS accepts "reconstructed records" as long as they're reasonable and based on available evidence. I learned this when preparing for my home sale last year. You can use: - Bank statements showing payments to contractors or home improvement stores - Credit card statements with clear descriptions - Canceled checks made out to contractors - Permits pulled for work (these are public records) - Before/after photos with written explanations - Contractor invoices or estimates (even old ones) The key is being able to demonstrate that the improvements actually happened and provide a reasonable estimate of costs. I was able to reconstruct about $35,000 in improvements this way, which made a huge difference in my capital gains calculation. Also, don't forget about smaller improvements like new appliances, fixtures, or even landscaping that adds value - these all count toward your adjusted basis if you have documentation.

One thing I haven't seen mentioned yet is the importance of documenting the selling expenses when you calculate your capital gains. These can significantly reduce your taxable gain and include: - Real estate agent commissions (usually 5-6% of sale price) - Title insurance and escrow fees - Attorney fees - Transfer taxes - Home inspection fees paid by seller - Staging costs - Marketing expenses - Any repairs required by the buyer as part of the sale These selling expenses are subtracted from your sale price along with your adjusted basis to determine your actual capital gain. For a $400,000 home sale, you might have $25,000+ in selling expenses, which is a substantial reduction in your taxable gain. Also, @AstroAlpha, regarding your mother's inheritance situation - make sure she gets a proper appraisal of the property's fair market value as of the date of death. This becomes her new basis, and having professional documentation will be crucial if the IRS ever questions the stepped-up basis amount. Don't rely on online estimates like Zillow - get a real appraisal from a licensed appraiser.

I went through a similar nightmare with a Schedule L that wouldn't balance last year! After hours of frustration, I discovered the issue was with how I was handling the depreciation. Make sure you're not double-counting depreciation anywhere. Check that: - Current year depreciation expense is properly reflected on the income statement - Accumulated depreciation is correctly updated on the balance sheet - Any Section 179 or bonus depreciation is handled consistently between your books and Schedule L Also, since you mentioned this is a construction partnership, watch out for work-in-progress (WIP) inventory. Construction companies often have jobs that span year-end, and the WIP can be tricky to value correctly. If they use percentage-of-completion accounting, make sure the WIP balance on Schedule L matches what's in their job costing system. One more thing - double check any equipment trades or disposals during the year. Construction companies frequently trade in old equipment, and if the gain/loss on disposal wasn't recorded properly, it can throw off both your fixed assets and equity accounts. You're so close with only $3,200 left to find! It's probably just one or two items that got missed or miscategorized.

As a tax preparer who's worked on dozens of partnership returns, I can tell you that Schedule L balance sheet issues are incredibly common, especially with construction partnerships. The good news is you're making excellent progress narrowing it down from $13,750 to $3,200! One area that often causes the remaining discrepancy in construction partnerships is subcontractor payments and related payables. Construction companies frequently have: - Retainage withheld on subcontractor payments that may not be properly recorded as a liability - 1099 payments made in January for December work that create timing differences - Disputed amounts with subcontractors that get recorded inconsistently Also check your accounts payable aging report from December 31st against what you have on Schedule L. Sometimes there are small invoices that were received but not entered into the system until after year-end. Another common culprit with that remaining $3,200 range is payroll-related items: - Accrued payroll for the last few days of December - Payroll tax liabilities that haven't been paid yet - Worker's comp insurance adjustments or deposits Since you're so close, try pulling a detailed general ledger for December and January to look for any entries that might have been recorded in the wrong period. Construction partnerships often have a lot of cash transactions and year-end adjustments that can easily get misplaced. You've got this - that final $3,200 is definitely hiding somewhere in the details!

Don't forget that the self-employed health insurance deduction goes on Schedule 1, not Schedule C! I messed this up my first year and it caused all kinds of issues.

Thanks everyone for all the helpful advice! This thread has been incredibly useful. Just to make sure I understand correctly - since I'm repaying the premium tax credits on my return (which means I'm ultimately paying for the full insurance cost), I can deduct the entire $650/month premium amount, not just the $190 I paid out of pocket during the year? Also, I want to double-check something @Camila mentioned about spouse eligibility - my spouse works part-time at a photography studio but they don't offer any benefits to part-time employees. So I should still be eligible for the full deduction, right? One last question - when I enter this in TurboTax, should I expect to see it on Schedule 1 line 16? I want to make sure I'm putting it in the right place since this is my first year being self-employed.