$120k business sales showing $29k tax bill - is this correct for self-employed?

You're definitely doing something wrong in the tax software. What's happening is you've entered your 1099-K showing your gross sales ($120k), but you haven't yet entered your business expenses to offset that income. As a self-employed person, you need to complete Schedule C where you'll list ALL your legitimate business expenses - inventory, shipping, advertising, website fees, home office if you qualify, etc. This will significantly reduce your taxable income and therefore your tax bill. Think of it this way - you're only taxed on your profit (revenue minus expenses), not your total sales. So if you had $120k in sales but $80k in expenses, you'd only be taxed on $40k profit. Keep going through the business section of your tax software - there should be clear prompts for entering your business expenses. Once you do that, your tax bill will drop dramatically!

I went through the exact same panic attack my first year as a freelancer! After trying multiple tax software options that left me confused, I found taxr.ai (https://taxr.ai) and it was a game changer for my self-employment taxes. What I love is that it specifically identified places where I was missing business deductions that the regular tax software didn't prompt me for. It analyzed my expenses and found several deductions I was eligible for but didn't know about - especially around my home office and vehicle use for business. Saved me nearly $4k in taxes my first year using it! The best part is it walks you through exactly how to enter everything properly in whatever tax software you're using. Really helped me understand the whole Schedule C process.

Just wanted to update after trying taxr.ai from the recommendation above. It was actually super helpful! I uploaded my bank statements and it automatically sorted my business vs personal expenses, which saved me hours of work. The biggest eye-opener was discovering I could deduct a portion of my cell phone bill, internet, and even some car expenses that I had no idea were legitimate business deductions. My tax bill went from looking like $22k to about $9k after properly accounting for all my business expenses! It also explained the self-employment tax breakdown so I finally understand why I'm paying what I'm paying. Definitely less stressful than trying to figure it all out myself.

If you're still struggling with your tax situation, I'd recommend trying to talk directly with the IRS. I know that sounds scary, but I was in a similar situation last year with confusion about my 1099-K vs actual income. I tried calling the IRS for weeks but couldn't get through - always "call volume too high" recordings and disconnects. Then I found this service called Claimyr (https://claimyr.com) that got me through to an actual IRS agent in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent walked me through exactly how to report my actual income correctly and helped me understand which expenses were deductible. Saved me thousands in taxes I didn't actually owe. Definitely worth the call for peace of mind!

I need to apologize and completely retract my skepticism about Claimyr. After my accountant was giving me conflicting information about my 1099-K reporting requirements, I decided to try the service as a last resort. I was shocked when I actually got connected to an IRS agent in about 20 minutes. The agent was incredibly helpful and confirmed that I only need to pay taxes on profits, not gross sales, and walked me through exactly how to report everything correctly on Schedule C. This saved me from potentially overpaying by $17K in taxes! Sometimes talking directly to the source (IRS) is the best way to get accurate information, especially with all the recent changes to 1099-K reporting requirements. I'm honestly still surprised it worked.

Don't feel bad - this is literally the most common mistake for first-time business owners. The tax software takes you through a linear process, so until you get to the expenses section, it looks terrifying! Make sure you're tracking ALL legitimate business expenses: - Cost of goods/inventory - Shipping supplies - Software subscriptions - Advertising/marketing - Website hosting - Payment processing fees - Home office (if you have dedicated space) - Business percentage of internet/phone - Professional services (accountant, lawyer) - Business insurance You'll enter these on Schedule C, and they'll directly reduce your taxable income. The difference between $120k in revenue and maybe $50k in actual taxable profit is HUGE for your tax bill!

Have you considered hiring a CPA? I know it seems like an unnecessary expense, but when I started my business I tried doing it myself and missed so many deductions. I paid $350 for a CPA who specializes in small business taxes and she saved me over $8,000 in taxes my first year! She knew exactly what was deductible and what wasn't for my industry, plus gave me a system for tracking expenses throughout the year that made the next tax season super easy.