Step 1: Estimate desired size.
We had just discovered that our son's trick-or-treat bag was the exact length between his hand and the ground. Not good for that particular bag (my homemade felt bag picked up a lot of leaves), but it was a useful indicator: this little bag needed to be about three inches shorter than that.
Step 2: Deconstruct.
I removed the handles with a seam ripper, and chopped off the top of the bag. I didn't worry too much about measuring, because if this ended up being a little too small, it wouldn't matter.
Step 3: Fold and pin.
I turned the bag inside out, folded the cut edge over twice (more rolled than folded), and pinned it in place. Then I pinned the handles back in place. I think the handles were originally sewed on the outside and they ended up on the inside, but this really doesn't matter. A two-year-old is going to be dragging it around.

Step 4: Sew.
I couldn't believe I actually had red thread! Wonder where that came from? I sewed along the folded seam, cut the thread at the end, and that was it. Neatness does not matter: lumps, crooked seams, and uneven anything is acceptable! The little guy used it the very next day.
It is better to use like this reusable bags to have less plastic usage.
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