Your calculation is spot on! The numbers really do show that self-employment tax isn't the monster it's made out to be. I went through the same panic when I first started freelancing, but once I did the math like you did, I realized the total tax burden is nearly identical. The real kicker for me was discovering the QBI deduction - that 20% qualified business income deduction can be huge for self-employed folks. On your $100k example, that could potentially save you another $4,000+ in income taxes (depending on your tax bracket and other factors). Also, don't forget about quarterly estimated payments! Since you're not having taxes withheld automatically, make sure you're setting aside about 25-30% of your income for taxes throughout the year. I learned this the hard way my first year when I got hit with underpayment penalties. The psychological aspect is definitely the hardest part - writing those big checks to the IRS quarterly feels brutal compared to never seeing the money in the first place as a W-2 employee.

Great analysis! You've really nailed the math on this. I went through the exact same stress when I transitioned from W-2 to freelancing last year, and like you discovered, the actual tax burden difference is minimal when you crunch the numbers properly. What really helped me get over the psychological hurdle was setting up a separate "tax savings" account where I automatically transfer 30% of every payment I receive. This way, when quarterly estimated payments come due, I'm not scrambling or feeling like I'm losing money I've already spent. It mimics the automatic withholding experience of being an employee. One thing to add to your calculation - don't forget about the additional Medicare tax if your income gets higher. Once your net earnings from self-employment exceed $200k (single) or $250k (married filing jointly), you'll owe an additional 0.9% Medicare tax. But honestly, that's a good problem to have! The freedom and potential tax advantages of self-employment (business deductions, retirement plan options, QBI deduction) often more than make up for the slight difference in how the taxes are structured.

19 Has anyone used TaxAct or H&R Block's 1099 filing services for this? I'm trying to decide if I should just use those or go with a specialized service. I'll only have about 5-6 forms to issue so I'm not sure what makes the most sense cost-wise.

Just went through this exact situation last year! I had received about $8,000 in Patreon donations for my art project before forming my LLC, and paid several freelancers from my personal account. The key thing I learned is that it doesn't matter AT ALL that you weren't officially a business entity - the IRS treats any trade or business activity the same way, whether you're incorporated or not. You'll definitely need to issue 1099-NEC forms for your sound engineer and guest speakers since they provided services, and a 1099-MISC for the studio rental. Use your SSN as the payer ID and make sure to get W-9s from everyone ASAP. One tip: if you're having trouble tracking down contact info for people, try searching their names on LinkedIn or other social platforms - I was able to find updated contact info for two contractors that way. Also, start collecting W-9s NOW before you pay anyone else, even for your LLC work. Makes life so much easier come tax time!

This is such a valuable discussion! I'm dealing with this exact situation and appreciate everyone sharing their experiences. I have a portfolio of Treasury securities including some I-bonds, regular Treasury notes, and a few Treasury bills I bought at discount through my broker. What's been really helpful from reading through all these comments is understanding that the state tax exemption applies to ALL income from Treasury securities, not just the obvious interest payments. I was definitely confused about the market discount portion, and my tax software (TaxAct) seems to be including it on my state return incorrectly. One thing I'm curious about - do I-bonds follow the same rules? I know they have that inflation adjustment component, and I'm wondering if both the fixed rate and the inflation adjustment portions are exempt from state tax. Also, I've been deferring the tax on my I-bonds until redemption - when I eventually cash them in, should that entire amount (original purchase price plus all accrued interest) be excluded from my state return? It sounds like I need to do a comprehensive review of my state return to make sure I'm excluding everything I should be. The tip about adding up ALL Treasury income and ensuring the total exclusion matches is going to be really useful for my situation.

This thread has been incredibly helpful! I'm a tax professional who often gets questions about Treasury securities and state taxation, and I wanted to add a few practical points based on what I've seen in practice. First, you're all absolutely correct that both coupon interest AND market discount from US Treasuries should be exempt from state income tax. The constitutional protection against state taxation of federal obligations is comprehensive and covers all forms of income derived from these securities. However, I want to emphasize something that several people touched on - the biggest challenge isn't usually determining what should be exempt, but rather figuring out HOW to properly report the exemption on your specific state's forms. Each state handles this differently, and tax software often misses the market discount portion. A few additional tips from my experience: 1. **Documentation is key** - Keep detailed records of all your Treasury purchases, especially those bought at discount. You may need this if your state ever questions the exemption. 2. **Don't forget about mutual funds** - If you own Treasury-focused mutual funds or ETFs, the Treasury interest they pass through to you should also be exempt from state tax, but this often gets overlooked. 3. **Estimated taxes** - If you have significant Treasury holdings, make sure you're not overpaying estimated state taxes throughout the year. Many people forget to account for the exemption when calculating their quarterly payments. The tools mentioned here (taxr.ai for analysis and Claimyr for reaching state tax departments) sound like excellent resources for anyone dealing with complex Treasury income situations. When in doubt, it's always worth getting confirmation from your state tax authority rather than potentially overpaying.

I've been following this thread with interest since I'm in a similar boat! Just wanted to add that I called FreeTaxUSA customer service yesterday to confirm the amendment situation, and they were pretty upfront about it - yes, you absolutely need the Deluxe upgrade for federal amendments, no exceptions for their free tier. However, the rep did mention something useful that I haven't seen discussed here: if you're within 3 business days of filing your original return, they can sometimes help you file a "superseding return" instead of an amendment, which replaces your original return completely and doesn't require the Deluxe upgrade. Obviously this won't help most people since we usually discover mistakes weeks or months later, but might be worth knowing for anyone catching errors quickly. For those considering the TaxAct route mentioned above - definitely worth a shot! I'm planning to explore that option myself before committing to any paid upgrades. The worst that happens is I spend an hour checking it out and then fall back to paying the $7.99 FreeTaxUSA fee if needed.

This thread has been incredibly helpful! I've been putting off dealing with my amendment situation for weeks because I was dreading the potential costs and complexity. Based on everyone's experiences here, I think I have a solid game plan now: 1. First, I'll try TaxAct's free amendment feature since my situation is straightforward (just need to add a 1099-INT I received late) 2. If that doesn't work out, I'll go with FreeTaxUSA's Deluxe upgrade knowing that $7.99 is still reasonable compared to other services 3. As a last resort, I might try the Free File Fillable Forms if I'm feeling confident about doing it manually I really appreciate everyone sharing their real experiences rather than just speculation. The specific details about TaxAct's free tier handling simple amendments and FreeTaxUSA's Deluxe package including audit assistance really help with making an informed decision. One quick question for the group - has anyone dealt with amending when you have both federal and state returns? I'm wondering if the state amendment process is similarly complicated across different platforms, or if most states have their own free amendment options I should be aware of.

Has anyone mentioned installment sales yet? When I sold my distribution business, I negotiated for 35% upfront and the rest paid over 3 years. This spread out my tax liability and actually kept me in a lower bracket each year. The buyer wasn't thrilled initially but I offered a slight discount on the total purchase price in exchange for the payment terms. Make sure to get security though - I required a lien on the business assets until full payment.

This is exactly why proper due diligence and security structures are crucial in installment sales. In my experience helping clients structure these deals, you can mitigate most of the risk through: 1. **Personal guarantees** from the buyers (especially if they're individuals or small entities) 2. **UCC liens** on all business assets until final payment 3. **Escrow arrangements** for a portion of the deferred payments 4. **Performance covenants** that require maintaining certain financial ratios 5. **Acceleration clauses** if they miss payments or breach covenants The tax benefits can be substantial - especially for someone like Mei with a $4M+ deal. Even if you discount the total price by 5-10% to get installment terms, you could still come out ahead after taxes if it keeps you in lower brackets or helps with other tax planning strategies. That said, you're absolutely right that cash upfront eliminates collection risk entirely. It really comes down to your risk tolerance, the creditworthiness of the buyers, and how much the tax savings would be worth to you. With proper legal structure though, installment sales can work well for both parties.