This is really helpful. I think I might not qualify since the kids are primarily with their mom, but I'll double check the requirements. Do you know if there's any documentation I need to keep in case the IRS questions my filing status?

You should definitely keep records showing when your separation began - any legal separation documents, lease agreement for your apartment showing when you moved out, and anything documenting your custody arrangement. Also save records of all household expenses you paid (rent/mortgage, utilities, repairs, food, etc.) to prove you paid more than half the cost of keeping up a home if you try to claim Head of Household. If the kids are primarily with their mom, you probably won't qualify for HOH. But if she's willing, she could release the dependency exemption to you using Form 8332 (though she'd still claim HOH). This form specifically allows the custodial parent to release the child's exemption to the non-custodial parent.

The stimulus payments were years ago though? I don't think there have been any since 2021. Are you saying we can still claim them somehow if we didn't get the right amount back then?

Is it really 30%? That seems crazy high! Do you really need to set aside that much? I just started freelancing and haven't been saving nearly that amount...

The 30% is a safe estimate that covers federal income tax, state income tax (depending on your state), and self-employment tax (which is 15.3% alone). It's better to save too much than too little. Your actual rate will depend on your total income, deductions, credits, and state. If you're in a high-income bracket and a high-tax state, it could actually be higher than 30%. If you're in a lower bracket or a state with no income tax, you might need less. But starting with 30% is usually a good rule of thumb for most freelancers.

Nope, their classification doesn't affect yours. You're still an individual/sole proprietor regardless of how the entity paying you is structured. Their business structure only matters for their taxes, not yours.

That's a great suggestion I hadn't considered. My dad was always pretty diligent about filing on time before he got sick, so he probably would qualify. Do I need to file a specific form for this abatement request or just call and ask for it?

You don't need a specific form for First Time Penalty Abatement. The easiest approach is to call the IRS directly and make a verbal request. Make sure to specifically use the phrase "First Time Penalty Abatement" when speaking with the representative. If you prefer to request it in writing, you can submit a penalty abatement letter that clearly states you're requesting First Time Penalty Abatement. Include your father's name, SSN, the specific tax year (2019), and a statement confirming that he had a history of compliance for the three prior years. Attach a copy of the death certificate as well.

This is so true. My brother never filed his 2017 taxes and the IRS created a substitute return for him in 2022 that assessed over $12,000 in taxes because they only counted income and NONE of his deductions or credits. He would have actually been due a refund if he'd filed properly. Don't wait!

Thanks for this advice. Is filing Form 7004 for an extension still helpful even though I've already missed the original March deadline? And do you know if first-time penalty abatement is something I can request myself or do I need a tax professional to help with that?

Yes, filing Form 7004 is still helpful even after missing the deadline! It prevents additional penalties from accruing after the original due date. So while you'll still owe penalties for the period between March 15 and when you file the extension, you won't accumulate more penalties through September. First-time penalty abatement is something you can absolutely request yourself - you don't need a professional. After you file the late return, call the IRS business line and simply ask for "first-time penalty abatement." If you have a clean compliance history (no penalties in the past 3 years), they will often grant it over the phone. Just be polite and explain that you weren't aware of the filing requirements since this was your first year with actual business activity.

That's not entirely accurate. S-Corps save on SE taxes but they have more compliance requirements like payroll tax filings and reasonable salary documentation. Plus the OP would need to file Form 2553 to elect S-Corp status, and retroactive elections can be tricky. Not worth the headache for a small LLC that's just starting out in my opinion.

That's really helpful! But what if I didn't pay any taxes last year because I was a student and didn't have income? Does that mean I don't have to pay anything for this year's quarterly taxes, or am I misunderstanding the safe harbor rule?

If you didn't have any tax liability last year, then technically 100% of last year's tax would be $0. However, in this situation, you'd need to use the other safe harbor provision of paying 90% of what you'll owe this year. Since this is your first year with self-employment income, you do need to make estimated quarterly payments. But the good news is that with your relatively low income level around $6,800, your total tax obligation won't be very high. You might actually qualify for certain deductions and credits that could significantly reduce what you owe.

Your clients should send you a 1099-NEC form (for Non-Employee Compensation) if they paid you $600 or more during the year. You don't create these yourself. However, whether you receive 1099s or not, you're still required to report all your income and pay quarterly taxes on it. The 1099s are basically just documentation of what you earned, but you should be keeping track of all your income regardless of whether you get these forms. For calculating quarterly taxes, you'll estimate your annual income and tax liability based on your earnings, then divide by 4 to determine your quarterly payments.