Just wanted to add something that helped me a lot when I was in your exact situation - consider opening a separate business checking account even for your small freelance income. I know it seems overkill for under $10k, but it makes tracking expenses SO much easier come tax time. I use it for all business-related purchases (software subscriptions, equipment, supplies) and then at the end of the year I just download the statement and have a clear record of every deductible expense. Before I did this, I was scrambling through personal credit card statements trying to remember which purchases were business-related. Also, since you mentioned you're a graphic designer, don't forget you can deduct things like stock photo subscriptions, font licenses, design books, and even a portion of your Adobe Creative Suite if you use it primarily for work. These industry-specific deductions can really add up and help offset some of that self-employment tax burden. The separate account also makes you feel more "legitimate" as a business, which honestly helped my confidence when claiming deductions. It's easier to justify home office expenses when you have clear business banking records showing this is a real ongoing business, not just occasional side income.

I'm in almost the exact same boat as you! Made about $8,200 last year doing freelance writing and web content, and yeah - that self-employment tax hit was brutal. What really helped me understand it better was realizing that as a 1099 contractor, you're essentially running a small business in the eyes of the IRS, even if it doesn't feel that way. One thing that saved me some money was being more aggressive about tracking business expenses. I started using a simple spreadsheet to log everything - even small stuff like printer paper, ink cartridges, and that ergonomic mouse I bought specifically for work. Those $15-30 purchases throughout the year added up to almost $400 in deductions I would have missed otherwise. Also, if you have a dedicated workspace at home (even just a corner of a room), make sure you're claiming the home office deduction. For my 120 sq ft workspace in my 1,200 sq ft apartment, I could deduct 10% of my rent, utilities, and renter's insurance. That was another $800+ in deductions. The 15% you're setting aside sounds about right for self-employment tax, but don't forget you might get some of that back if you qualify for things like the Earned Income Tax Credit. Definitely worth double-checking all the credits available for lower-income taxpayers!

Has anyone mentioned the option of maxing out your 401k contribution from this bonus to defer some of the taxes? If you haven't already hit your annual contribution limit, you might be able to direct a portion of this bonus (up to the annual max) into your 401k, which would reduce the immediate tax hit.

Another consideration for a bonus this large - you might want to think about charitable giving strategies if that's something you're interested in. With a $1.3M bonus pushing you into the highest tax brackets, charitable deductions become extremely valuable. You could potentially set up a donor-advised fund or make direct charitable contributions before year-end to offset some of the tax burden. Even if your employer withholds at the mandatory rates, strategic charitable giving could help reduce your overall tax liability when you file. Just make sure to keep detailed records and consider bunching multiple years of charitable giving into this high-income year to maximize the benefit. A tax professional who specializes in high-income situations would be invaluable for planning something like this.

Has anyone considered using an S-Corp structure for the property management company instead of an LLC? With an S-Corp, you can pay yourself a reasonable salary (subject to FICA taxes) but take additional profits as distributions that avoid self-employment tax. Might be more advantageous than the straight LLC approach.

This is a great discussion and I've learned a lot from everyone's experiences. I'm in a similar boat with 4 rental units and have been frustrated about not being able to use that income for retirement contributions. One question I haven't seen addressed: How do you handle the transition year when you're setting up this structure? I assume you can't retroactively convert rental income from earlier in the year to "earned" management income, so would you only be able to contribute to your Roth based on the management salary earned from the date you establish the LLC forward? Also, for those who've implemented this - do you find it's worth the extra complexity and costs (additional tax filings, separate business accounts, etc.) for the ability to make Roth contributions? I'm trying to weigh whether the long-term tax-free growth benefits outweigh the administrative hassle and additional self-employment taxes.

I'm confused by some advice here. My accountant told me ANY 1099-NEC income HAS to be reported on Schedule C as business income, no exceptions. He said the IRS automatically matches 1099-NECs with Schedule C filings and you'll get flagged if you put it on Schedule 1 instead. Am I missing something?

As someone who's dealt with similar confusion, I'd recommend being really careful about whose advice you take here. I see people recommending various tools and services, but honestly, the IRS publication 535 (Business Expenses) has a clear section on hobby vs. business that's free and official. The key question is: are you engaged in this activity with the genuine intent to make a profit? Based on your description - playing once a month for enjoyment, not actively seeking more gigs, not depending on the income - this really does sound like hobby income to me. If you classify it as hobby income on Schedule 1, you'll avoid self-employment tax but you also can't deduct any related expenses. Given that you're not trying to deduct expenses anyway, this seems like the most straightforward approach for your situation. Just make sure whatever you decide, you're consistent. If you call it a hobby this year, don't suddenly switch to business next year unless your behavior actually changes (like if you start actively marketing your services or depending on the income).

I understand your confusion completely! As someone who moved to the US a few years ago, the transcript system was absolutely baffling at first. The 'as of' date is basically just an administrative checkpoint - it's like the IRS saying "we'll definitely have your account updated by this date" but it doesn't mean you have to wait until then for your refund. In my experience, I've received refunds anywhere from 5-12 days before the 'as of' date shown on my transcript. The real game-changer for me was learning to look for the specific transaction codes rather than focusing on that date. Once you see code 846 (Refund Issued) appear on your transcript, that's when you know your refund is actually being processed for payment. From that point, direct deposits typically arrive within 5-7 business days. Don't worry about doing something wrong - the US tax system is genuinely confusing even for people who grew up here! Your friend was right that getting money earlier than the transcript date is totally normal. Just keep an eye on the "Where's My Refund" tool and try not to check your transcript more than once or twice a week (trust me, daily checking will drive you crazy!).

Welcome to the wonderful world of US tax filing! Your confusion is totally understandable and honestly pretty common. I went through the exact same thing when I first moved here from Canada - our system up north is way more straightforward than this transcript maze the IRS has going on. The 'as of' date is basically the IRS being overly cautious and saying "we promise to have this sorted by then, but probably sooner." I've filed taxes here for about 8 years now, and I'd estimate I get my refund before that 'as of' date roughly 80% of the time. Last year mine showed April 22nd but the money hit my account on April 8th. What really matters is when you see that magical 846 code appear on your transcript - that's when they've actually cut your refund check (or initiated the direct deposit). From there it's usually just a few business days. Your friend was absolutely right about getting money earlier than expected. The IRS builds in buffer time because they'd rather under-promise and over-deliver than have people calling constantly asking where their money is. You didn't mess up your forms - first-time filers actually tend to have simpler returns that process faster since there's less complexity for the system to review.