Online seller with inventory
A handmade-goods seller with a 1099-K and real inventory. Cost of goods sold, gross profit, self-employment tax, and QBI.
The taxpayer's facts and source documents are free with an account. No card, nothing to cancel.
Taxpayer facts
Who this is and what their year looked like.
Lena is single and runs a handmade-candle shop online from Sioux Falls, South Dakota. 2025 was a good year, mostly through a marketplace platform plus a few direct sales.
She keeps inventory of wax, wicks, and jars, tracks it at the start and end of the year, and made some estimated tax payments. She uses the cash method and the simplified home-office deduction.
Source documents
The 2 documents you will prepare the return from: 1099-K (Payment Card / Third-Party Network), Taxpayer's business records: Lena Fischer Candle Co..
Free with an account
Create a free account to open the taxpayer's facts and every source document. No card, nothing to cancel.
Objectives
What a correct return should capture.
- Report all business income on Schedule C: the 1099-K plus the direct sales.
- Compute cost of goods sold from inventory (Schedule C Part III): beginning inventory plus purchases less ending inventory.
- Subtract COGS from gross receipts to get gross profit.
- Deduct the operating expenses (marketplace fees, shipping, advertising, home office, supplies).
- Arrive at the Schedule C net profit (line 31).
- Compute self-employment tax and take the one-half SE tax adjustment.
- Take the QBI deduction on Form 8995, and watch the 20%-of-taxable-income limit.
- Apply the standard deduction and the estimated payments to find the refund or balance due.
- Note that South Dakota has no state income tax.
Check your work
The answer key and the complete return, the way a real client receives it: the 1040 and its schedules, the workpapers behind every number, and the signature forms.
Stuck? Work through it with Yehuda
A one-on-one, 30-minute tutoring session on this return with Yehuda Tenenbaum, EA. Bring the spot where you got stuck and we will work through it together: how the forms connect, why a figure lands where it does, and how to check your work. $250. This is education on the practice return, not advice on your own taxes.