What about the Social Security overpayment though? I work two jobs and always end up overpaying. Is there a way to adjust for that during the year too?

The Social Security overpayment is trickier because employers don't coordinate with each other. If you know your total earnings will exceed the Social Security wage base ($168,600 for 2024), you can estimate how much you'll overpay. The calculation is basically 6.2% of the amount you'll earn above the wage base across all jobs. Once you have that number, you can adjust your W-4 at your highest-paying job to compensate by adding that estimated overpayment amount to Step 3 of your W-4 or reducing the additional withholding in Step 4(c). Just be careful not to adjust so much that you end up owing a lot at tax time. It's usually safer to get a small refund than to owe penalties.

I'm planning on erring on the side of caution. If your income might put you over the threshold, don't adjust your withholding for the credit. Better to get a refund than owe penalties. You could also do a partial adjustment if you're fairly confident you'll get at least some of the credit.

Thanks for mentioning this! How would I know if a payment was applied to the wrong year? I made my Q4 payment in January 2024 but it was for tax year 2023. Should I be concerned?

If you made your Q4 payment in January 2024 but intended it for tax year 2023, you should be fine as long as you designated it correctly when making the payment. The IRS form/payment system usually asks you which tax year the payment is for. To verify this, you can check your payment confirmation from when you made the payment. It should indicate the tax year. If you're still concerned, you can create an online account at IRS.gov and view your payment history, which shows which tax year each payment was applied to. Just make sure when entering in FreeTaxUSA that you include this payment with your 2023 estimated payments, even though you made it in 2024.

Their interface is definitely not the most intuitive. I found it by using the search feature at the top - just type "estimated payments" and it should take you directly to that section. Saved me a ton of time hunting through menus!

But what if the distribution happened in December 2024 but you don't get the 1099-R until February 2025? Wouldn't that mess up your filing for 2024 if you've already submitted before getting the form?

That's a great question! If a distribution happens in December 2024, but you don't receive the 1099-R until February 2025, you still need to report it on your 2024 tax return. If you've already filed your 2024 return before receiving this form, you would need to file an amended return (Form 1040-X) to include the information from the late-arriving 1099-R. That's why many financial advisors recommend waiting until at least mid-February to file if you know you had distributions, to make sure you've received all your tax documents.

What tax software do you recommend for handling retirement distributions? I've got a mix of regular withdrawals and rollovers this year and I'm worried about messing it up.

Thanks for this suggestion! My income is actually within the Roth IRA eligibility range but below the higher threshold. I was trying to diversify between pre-tax and post-tax retirement savings, but if I can't deduct the Traditional IRA contributions anyway, switching to Roth IRA might make more sense. Would there be any advantage to keeping non-deductible Traditional IRA contributions rather than just going with the Roth IRA directly?

If you can't deduct your Traditional IRA contributions and you're eligible for a Roth IRA, there's generally little advantage to making non-deductible Traditional IRA contributions instead of contributing directly to a Roth IRA. The main exception would be if you're planning to use the "Backdoor Roth" strategy in the future. Some people make non-deductible Traditional IRA contributions and then immediately convert them to Roth. This can be useful for those who exceed the Roth IRA income limits. However, this gets complicated if you already have other pre-tax money in Traditional IRAs due to the "pro-rata" rule.

I used TurboTax this year with the exact same retirement setup (Roth 401k + Traditional IRA), and it also said my Traditional IRA wasn't deductible because I participate in a workplace plan. So I think all the major tax software follows the same IRS rules on this.

How exactly does the SEP IRA thing work? Is it complicated to set up? And what percentage should I be setting aside if I don't want to get hit with this kind of bill again?

A SEP IRA is pretty straightforward to set up - most major brokerages (Vanguard, Fidelity, etc.) can help you open one in about 20 minutes online. You can contribute up to 25% of your net self-employment income or $66,000 for 2023, whichever is less. It directly reduces your taxable income dollar-for-dollar, which is huge. For setting aside money, I'd recommend 30-35% of every payment you receive. I actually have a separate savings account called "Tax Fund" where I immediately transfer that portion whenever I get paid. It seems high, but it covers both income tax and self-employment tax. If you're in a state with income tax, you might want to bump that to 35-40%. It's better to have a little extra saved than not enough when tax time comes around.

I've used both and honestly found TurboTax Self-Employed to be more thorough for 1099 income. It asks more specific questions about potential business deductions and seemed to find more write-offs. It's more expensive but worth it IMO.