Something nobody's mentioned yet - if you've been holding for over a year, you qualify for long-term capital gains rates which are MUCH lower than short-term. Depending on your income bracket, you might pay as little as 0% or 15% instead of your normal income tax rate. Also, if you sell at a loss, you can deduct up to $3,000 against ordinary income per year and carry forward any additional losses to future tax years. Don't let the 8949 form complexity keep you from making sound financial decisions! Just use good software to track everything.

Just want to warn people that even if wallet-to-wallet transfers aren't taxable, you NEED to keep immaculate records of them. If you get audited and can't prove which transfers were between your own wallets, the IRS might treat them all as sales. I learned this the hard way. Document everything, keep screenshots of transfers, save your wallet addresses, and use a good tracking system. Better to have too much documentation than not enough.

One thing nobody mentioned yet - keep track of ALL your expenses related to your freelance work! As a self-employed person, you can deduct: - Portion of your phone bill used for business - Any design software subscriptions - Computer equipment (partially) - Home office space (if you have a dedicated area) - Marketing expenses - Website costs I learned this the hard way my first year freelancing and missed out on tons of deductions. Start a simple spreadsheet now to track everything!

quick question - if your parents are still providing more than half your support (like paying for housing, food, etc) can they still claim you as a dependent even if you file your own taxes? my situation is similar to OP's.

One thing nobody's mentioned - the "reasonable compensation" requirement for S corps doesn't necessarily mean you have to pay yourself regularly throughout the year. The IRS cares about the annual amount being reasonable for your role and industry, not the frequency. I've been running annual payroll for my S corp for 3 years now. I use Gusto, which charges a base fee of $39/month plus $6/person. So yes, I pay the monthly fee year-round, but the simplicity is worth it to me. In December, I run payroll once I know what my business profits will be, making sure my salary meets that "reasonable compensation" threshold. For Form 941, I file every quarter marking zeros for the first three quarters. It's annoying but takes like 10 minutes once you know how to do it. Some states also require quarterly unemployment tax filings even with zero wages. The real headache isn't the payroll itself but documenting why your salary is "reasonable" - keep good records of industry salary surveys, time spent working, etc.

I just want to point out that there's a third option beyond "subscribe and cancel payroll service" or "pay monthly fees all year" - you can use a CPA that offers payroll services. My accountant charges me a single fee for year-end S corp payroll processing rather than monthly fees. They handle everything - calculating the optimal salary based on my business profits, preparing the W-2, filing Form 941 for that quarter, and ensuring I've met the reasonable compensation requirements. They also keep records to justify my compensation in case of audit. For the other three quarters, they file the Form 941 with zeros as needed. The total annual cost is significantly less than paying a monthly subscription to a payroll service, and I don't have to think about it until December.

Something similar happened to me in 2023! If it helps ease your mind, I can tell you my experience. I mailed my return late (in May) without an extension, but I was due a refund like you. No penalties at all. Got my refund after about 10 weeks. The IRS is really only concerned with punishing people who owe them money and pay late. Since you're owed a refund, you're basically just letting them hold onto your money longer, which they're happy to do. Just make sure you keep copies of EVERYTHING you sent them, including that explanation letter. And if you're really worried, you might want to check your tax transcript on the IRS website after a month or so to see if there's any activity.

Just a tip for next year - always save your AGI (Adjusted Gross Income) from the previous year's tax return. That's often why e-filing gets rejected with "already filed" errors - the system uses your prior year AGI to verify your identity. If you enter it wrong, it can trigger that error message even though no one has actually filed your return.

One thing no one has mentioned yet - there's a difference between not taking deductions and incorrectly reporting your income. You don't have to take every deduction you're eligible for, but you DO have to accurately report all your income. So if you're thinking about not reporting legitimate business expenses to keep your income higher for EITC purposes, that gets into a gray area. For self-employed people, business expenses directly reduce your Schedule C income, which affects both your AGI and EITC. I'd be very careful about intentionally skipping deductions that directly affect how income is reported vs. those that are purely optional after your income is already correctly stated.

Something to consider: the EITC has different income thresholds based on filing status and number of qualifying children. For 2025, with one qualifying child, EITC begins to phase out around $46,500 for single/head of household. If your sister's income is right at one of these thresholds, small changes in AGI can have a big impact on the credit amount. This might explain why you're seeing significant changes in the EITC calculation when making adjustments. Most tax software will let you try different scenarios to see what gives the best outcome. Just make sure whatever you submit is truthful - the difference between optimizing your return and misrepresenting information is a critical line you don't want to cross.