Thanks for the reminder about Schedule SE! I actually did factor that in when I increased my withholding. I calculated roughly what I'd owe for both income tax and self-employment tax on the $18,500 and that's how I came up with the $320 per paycheck increase. Do you know if there's an easy way to check if I'm on track to meet the safe harbor requirement? I'm still a bit nervous about whether I've withheld enough.

You can use the IRS Withholding Estimator on their website. It will let you input both your W2 income/withholding and your 1099 income, then tell you if you're on track. Another simple approach is to look at your last paystub from 2024 and add up the federal withholding. Then add what you expect to have withheld for the rest of 2025 based on your current withholding rate. If that total is at least $16,300 (your tax from last year), you'll meet the safe harbor requirement.

But aren't you basically losing money by giving the government an interest-free loan? You could be investing that money throughout the year instead. I set calendar reminders for estimated payments and it's not that bad.

What about VAT/sales tax collection though? That seems like a legitimate reason to use these services - handling all the state-by-state sales tax requirements in the US is a nightmare for foreign businesses.

Sales tax collection is indeed one of the few legitimate benefits these services can provide. The US sales tax system is notoriously complicated with different rules across 50 states plus local jurisdictions. Having a US entity handle that complexity can be valuable. However, there are specialized sales tax compliance services that can handle just this aspect without the problematic "company rental" structure. Services like Avalara or TaxJar can manage US sales tax compliance for foreign companies at a much lower cost than these rental arrangements. You'd still need to register for sales tax in relevant states, but these specialized services can handle the calculation, collection and filing without the questionable tax structure these rental companies use.

Did setting up a proper LLC end up being much more expensive than the rental option? These services charge like $500/month which seems steep but cheaper than maintaining a full legal entity with annual fees, registered agent, etc.

Do you feel like it finds all the possible deductions? That's my main worry - missing out on money I should be getting back.

It walks you through all possible deductions and credits with a comprehensive questionnaire just like the expensive services do. For someone in your situation, it asks about education expenses, student loan interest, retirement contributions, and other common deductions. I actually found FreeTaxUSA to be more transparent about explaining which deductions you qualify for compared to TurboTax. They don't hide information behind paywalls or try to upsell you constantly. Every time I've compared my results between multiple tax programs, the refund amount has been identical because ultimately it's all based on the same tax laws.

I don't completely agree. While the tax code is the same, different software definitely asks different questions which can lead to finding deductions someone might miss. I've personally gotten different results between programs.

What's the difference between refundable and non-refundable credits? And can you really get more money back than you paid in taxes??

A refundable credit means you can receive the full amount of the credit even if it's more than what you owe in taxes. So yes, you can absolutely get back more money than you paid in! For example, the Earned Income Tax Credit (EITC) is refundable, so even if you owe zero taxes, you could still get money back if you qualify. Non-refundable credits can only reduce your tax liability to zero, but not below zero. So if you have $500 in tax liability and a $1,000 non-refundable credit, your tax bill goes to $0, but you don't get the extra $500 back.

Yes, that's exactly right! If you make $5,000, you'd take the standard deduction (about $14,600 for 2025) and your taxable income would be $0. If you make $20,000, you'd take the same standard deduction and only pay taxes on $5,400 ($20,000 - $14,600). It definitely can seem complicated, but the standard deduction actually simplifies things by ensuring people with lower incomes don't have to pay income tax. Think of it as the government saying "everyone gets their first $14,600 tax-free.

omg thank you for explaining it that way!! "everyone gets their first $14,600 tax-free" makes way more sense to me than all the technical jargon. i think i finally get it now.

Direct File is only for simple personal returns right now, not for business returns or extensions. For your 7004, you'll need to either use commercial tax software, have your accountant e-file it, or mail in a paper form. I've been using FreeTaxUSA for my S Corp returns for years - they handle the 7004 extension filing too and it's pretty straightforward.

Thanks for clarifying! I'll stick with my regular tax software then. Wish the IRS would expand these services to small businesses too.

Most COVID-related tax provisions have expired now. For the 2025 filing season (2024 tax year), things have largely returned to pre-pandemic rules. Employee Retention Credits ended, PPP loan forgiveness is old news, and the special sick leave credits are gone. The only lingering effects might be if you're still carrying losses forward from the pandemic years, but the special expanded rules for those have mostly reverted to normal too.