That's a good point! I should double-check the exact amount on the 1099-NEC they're referencing in the notice against what we have. Is there a way to get a transcript of what was reported to the IRS directly from them?

Yes, you can request a "Wage and Income Transcript" directly from the IRS which will show exactly what was reported to them on your behalf! You can get this online through the IRS website by creating an account at irs.gov/transcripts or by filing Form 4506-T. This is super helpful because it shows the exact amounts that were reported to the IRS by third parties (employers, banks, clients, etc). That way you can see if what you have matches what they have. In my sister's case, her client had submitted a higher amount to the IRS than what was on the copy they gave her.

Omg this happened to me too! Spent weeks trying to figure out why the IRS said I underreported when I knew I included everything. Turned out the payment processor filled both boxes with the same amount, essentially reporting my income twice. Such a headache to fix.

Wait, so I'm already in trouble for not paying quarterly taxes this past year? Will I get penalties? How do I even figure out how much I was supposed to pay each quarter?

Yes, you may face penalties for not making quarterly payments. The IRS calls these "failure to pay estimated tax" penalties. The penalty rate is currently around 3-4% of what you should have paid. To figure out what you should have paid, you generally need to pay either 90% of this year's tax or 100% of last year's tax (110% if your income was over $150,000) divided into four equal payments. For a first-time 1099 earner, this is tricky since you don't have a previous year of self-employment to reference. Moving forward, use Form 1040-ES to calculate your quarterly payments for the new tax year.

Be careful with deducting "every coffee you buy when working." That's not how it works. Regular coffee while you're working at home isn't deductible - that's just personal consumption. You can only deduct meals when you're traveling for business or having a business meeting with a client or potential client, and even then it's only 50% deductible in most cases.

Thanks for mentioning this! Does the deduction for half the SE tax reduce the amount of SE tax I pay, or just my income tax? And do I need a separate form for that or is it part of the regular 1040?

The deduction for half of your SE tax doesn't reduce the SE tax itself, but it does reduce your income tax. It's considered an "adjustment to income" (sometimes called an "above-the-line deduction"), which means you get this benefit even if you take the standard deduction rather than itemizing. You don't need a separate form for this deduction. When you complete Schedule SE to calculate your self-employment tax, the form will automatically calculate the deduction amount. This amount then transfers to Schedule 1 of your Form 1040 as an adjustment to income. Tax software handles this transfer automatically, making it pretty seamless.

If your W-2 wages already hit the Social Security limit ($168,600 for 2024), you'd only pay the Medicare portion (2.9%) on your self-employment income. If your W-2 is below the limit, you pay the full SE tax on your net self-employment income, but only up to the point where your combined income hits that limit. Either way, you still calculate it on Schedule SE.

Thanks for the info about TaxSlayer and IRS Direct Pay! I was wondering about making the payments online instead of mailing them. Does the Direct Pay system give you a confirmation that you can save for your records?

Yes, the IRS Direct Pay system provides a confirmation number immediately after your payment processes. You can print this confirmation page or save it as a PDF. I recommend doing both and keeping a folder (digital or physical) for each tax year with all your payment confirmations. They also send a confirmation email if you provide your email address during the payment process. I personally save these emails in a dedicated tax folder in my email account for easy reference later.

This is such an important point. I had the same thing happen in New York. Paid all my federal estimated taxes but completely forgot about state requirements. Ended up with almost $200 in penalties even though my actual state tax bill wasn't that high.

I actually do use TurboTax! Didn't know they had this feature - where exactly do I find it? Is it in the regular app or do I need to sign in on desktop?

It's available in both the desktop and online versions of TurboTax. Sign in to your account, go to "Tax Tools" and look for "Tax Documents and Records." From there, you should see an option for requesting transcripts or viewing past returns. The feature might be called something slightly different depending on which version you're using. Remember though, it won't be completely unredacted, but sometimes shows different information than what's masked in the direct IRS portal. Worth trying before making an in-person appointment.

This is the correct answer! I'm a mortgage underwriter and we specifically need to see the Tax Return Transcript because it shows AGI and filing status, plus the Wage & Income to verify all sources of income. The Account transcript isn't what we're looking for in most cases.