As someone who just went through this exact decision for my own small reselling business, I'd echo what others have said about cash method being the right choice for your situation. At $20k annual revenue, you're well under any thresholds that would require more complex accounting. One thing I learned the hard way is to start tracking your inventory costs properly from day one, even though it seems like overkill when you're small. I got lazy about it in my first few months and had to recreate records later - not fun! The way I think about it now: cash method for everything EXCEPT inventory. So when I buy shipping supplies or pay eBay fees, those get deducted immediately. But when I buy a vintage jacket for $12, that $12 sits in limbo until the jacket actually sells - then it becomes a deduction. I use a simple system where I take a quick photo of each item with a sticky note showing the date and what I paid, then file it in a folder on my phone by purchase month. When something sells, I can easily find the photo to confirm my cost basis. Takes 30 seconds per item but saves hours at tax time. The cash method has made my life so much simpler compared to trying to track when sales "occur" vs when payments arrive. For a small operation like yours, definitely go with cash + proper inventory tracking!

Ruby, you've gotten some excellent advice here! I went through this exact same decision process about a year ago with my small electronics reselling business, and I'm so glad I chose the cash method. At your revenue level ($20k annually), cash accounting is perfect. The simplicity alone will save you countless hours that you can spend actually growing your business instead of wrestling with complex bookkeeping. Here's my practical take on the inventory tracking that everyone's mentioning: Yes, you do need to handle inventory differently even with cash method, but it's not nearly as scary as it sounds. I think of it as having two separate buckets - one for regular business expenses (deduct when paid) and one for inventory purchases (deduct when sold). What really helped me was creating a simple "Item Log" where I record: purchase date, brief description, cost, and eventual sale date/price. When tax time comes, I just add up all the costs from items that actually sold during the tax year - that's my cost of goods sold deduction. The key insight that took me too long to learn: don't overthink this! Your business is straightforward - you buy things and resell them. Cash method + basic inventory tracking handles 99% of what you need for tax compliance. One last tip: if you're ever unsure about specific situations, the IRS small business resources are actually pretty helpful for sole proprietors. But honestly, for your scale and business model, you're in the sweet spot where cash method just makes everything easier.

This has been such an incredibly helpful thread! As someone who's about to face this exact situation when my partner moves into my townhouse next month, reading through everyone's real experiences has been way more valuable than trying to decipher IRS publications. I love how the conversation evolved from the basic tax question to addressing both the practical and relationship aspects. The hybrid approach that @Gianni Serpent described really resonates with me - having my partner pay some bills directly while contributing a smaller amount for mortgage feels like it would maintain the partnership dynamic we want while still handling the tax obligations properly. @Aria Park's point about fair rental value is something I definitely need to research for my area. And @Keisha Williams, thank you for that detailed breakdown of the deduction calculations - the Schedule E reporting makes much more sense now. One thing I'm curious about that I didn't see addressed: has anyone dealt with this situation during a year when they also had significant home improvements? I'm wondering how that affects the deduction calculations when you're already allocating expenses between personal and rental use. My partner and I are planning to renovate the kitchen this summer, so I want to make sure I understand how that factors in. Thanks again everyone for sharing your experiences so openly - this community is amazing!

This thread has been incredibly insightful! I'm a tax attorney and wanted to add a few important considerations I haven't seen mentioned yet. First, be very careful about the "expense sharing" approach some have suggested. While it sounds appealing, the IRS looks at the substance of the arrangement, not just how you label it. If someone is living in your home and making regular payments that help cover your housing costs, that's typically rental income regardless of whether you call it "rent" or "household contributions." That said, the hybrid approach @Gianni Serpent described is actually quite solid from a legal standpoint. Having the partner pay certain bills directly (utilities, groceries, etc.) removes those amounts from rental income consideration, while the direct housing contribution (mortgage portion) is properly reported as rental income. One critical point: make sure your allocation percentages can withstand IRS scrutiny. The "reasonable for the space used" standard is key. For a one-bedroom where you're sharing everything equally, 30-50% is typically defensible, but document your reasoning. Finally, consider the long-term implications. If this relationship becomes permanent, you might want to restructure before marriage since these arrangements can complicate property ownership issues. And definitely consult a local tax professional - state laws vary significantly on some of these issues. The documentation tips everyone has shared are spot-on. Consistency and clear records are your best protection in an audit situation.

Just to add another perspective - make sure you're also considering state tax implications if applicable. Some states have different rules about bad debt deductions than federal, so what's deductible on your federal return might not be on your state return. Also, if you haven't already, I'd strongly recommend getting a tax professional involved given the amount you're dealing with ($14k is significant). They can help ensure you're maximizing your deductions while staying compliant, especially since this is your first time handling this situation. The cost of professional advice is usually worth it to avoid potential issues down the road. One last tip - keep a separate file for each bad debt with all your collection documentation (emails, call logs, letters, etc.). If you ever get audited, having everything organized by individual debt makes the process much smoother.

Great discussion here! As someone who's dealt with similar issues, I want to emphasize the importance of establishing a clear written policy for bad debt write-offs before you actually need it. The IRS looks favorably on businesses that have consistent, documented procedures for determining when debts become uncollectible. I'd recommend creating a simple policy that outlines your collection process (initial invoice, follow-up at 30 days, final notice at 60 days, etc.) and when you'll consider a debt worthless (like after 120 days with no response despite documented attempts). Also, don't forget to check if your state requires you to attempt service of a formal demand letter before writing off debts over certain amounts. Some states have specific requirements that could affect your deduction eligibility. One more tip - if any of these customers are other businesses, you might want to check if they're still operating before writing off the debt. Sometimes a quick search of state business records can reveal if they've dissolved, which strengthens your case that the debt is truly uncollectible.

Just wanted to add another data point for anyone reading this thread - I've been filing from Singapore for 5 years now and can confirm that foreign wages definitely go on Line 1a. One thing I learned the hard way is to make sure you're using the correct exchange rates when converting SGD to USD. The IRS requires you to use the Treasury Department's yearly average exchange rates (available on their website) rather than spot rates or your bank's conversion rates. This can make a meaningful difference in your reported income amount. Also, since you mentioned you're using tax software, double-check that it's properly handling the Singapore tax year vs US tax year difference. Singapore's tax year runs from January to December, but make sure you're reporting the right period's income on your US return. I made this mistake my first year and had to file an amended return. The Foreign Earned Income Exclusion should cover your full $58k income assuming you meet the physical presence test (330 days in Singapore during any 12-month period). Keep a simple spreadsheet tracking your days in/out of Singapore - it'll save you headaches later if the IRS ever asks for documentation.

Just want to echo what everyone else has said - your Singapore wages definitely belong on Line 1a of Form 1040, not Line 1h. I went through this exact same confusion when I first moved to Hong Kong for work. One thing that might help clarify the logic: Line 1a is for ALL wages and salaries, regardless of the source country. Line 1h is specifically for miscellaneous income that doesn't fit into any of the other defined categories on the form (like gambling winnings, jury duty pay, etc.). Your regular employment income from Singapore is still wages, just foreign wages. The fact that you'll be excluding it later with Form 2555 doesn't change where you initially report it. Think of it as a two-step process: first you report ALL your worldwide income in the appropriate sections, then you apply exclusions and credits to reduce your taxable amount. Since you're earning about $58k USD equivalent and have been in Singapore for 3 years, you should easily qualify for the full Foreign Earned Income Exclusion (assuming you meet the physical presence test). Just make sure your tax software is set up to handle foreign income properly - most major programs have specific workflows for expats that will walk you through both the initial reporting and the exclusion forms.

I had a similar experience when I moved mid-tax season! USPS forwarding does work for W2s since they're First-Class Mail, but there can definitely be delays. What really saved me was setting up informed delivery with USPS - it shows you scanned images of mail that's coming to your address each day. That way you can track when your W2 is actually in transit and know if it gets stuck somewhere in the forwarding process. Also, if your old employer has a main corporate number, try calling that instead of your local office. Sometimes the corporate payroll department can handle address changes more efficiently than local HR, especially if your old location was disorganized like you mentioned. They usually have better systems in place for handling former employee requests. One last tip - keep records of when you set up mail forwarding and any communications with your employer about the address change. If you do need to contact the IRS later, having that documentation will speed up the process significantly.

One additional thing to consider - if you've already set up mail forwarding, you can also submit a "Change of Address" form (Form 8822) directly to the IRS. This ensures they have your current address on file, which can be helpful if there are any issues with your tax return processing or if you're due a refund. You can download it from irs.gov or mail in a handwritten note with your old address, new address, and SSN. This is separate from updating your address with your employer, but it's good to have both bases covered. The IRS form is particularly useful if you end up needing to contact them about missing tax documents later - they'll already have your current address in their system. Also, don't forget to update your address with your state tax agency if you moved to a different state. They often have separate requirements and deadlines for tax document delivery.