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The W-4 change in 2020 really messed a lot of people up. My wife and I had a similar issue last year. What fixed it for us was: 1) We both checked the box in Step 2(c) on our W-4s that says "If there are only two jobs total, you can check this box" 2) We each put an extra $75 per paycheck in Step 4(c) as additional withholding After making those changes mid-year, our tax situation evened out. This year we're getting a small refund of about $200, which is perfect. The IRS withholding calculator is helpful but honestly kind of confusing to use.
Did both of you need to check the box in Step 2, or just one of you? I've read conflicting things about this and don't want to withhold too much either.
We both checked the box, but I've since learned that was actually withholding too much. The correct approach is for only one spouse to check the box, not both. We ended up over-withholding a bit which is why we got that small refund. The safest approach is to use the IRS Tax Withholding Estimator online. It will give you specific instructions for each spouse's W-4. Usually it tells one person to check the box and the other not to, plus suggests additional withholding amounts if needed.
Has anyone used TurboTax's W-4 withholding calculator? My tax preparer recommended it over the IRS one but I'm not sure if its worth paying for when the IRS one is free.
I've used both and honestly the IRS one is better. The TurboTax one tries to upsell you on their paid tax prep services and doesn't give you as detailed instructions for filling out the W-4. Save your money and just use the free IRS Tax Withholding Estimator.
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Don't forget state taxes in this equation! California is extremely aggressive about taxing worldwide income. I worked for a Japanese company remotely from CA for 3 years and my state tax bill was brutal compared to what colleagues in Nevada paid (zero state tax). If you're making $127K equivalent, CA will take roughly 9.3% of that. Have you considered relocating to a no-income-tax state before taking this position? Could save you $10K+ annually.
I actually have been thinking about that! How hard was the process of working with a foreign employer while in California? Did they handle the state tax withholding properly or did you end up with surprise tax bills?
The foreign employer had no idea how to handle California taxes. They didn't withhold anything for state taxes, so I had to make quarterly estimated tax payments to the California Franchise Tax Board to avoid penalties. I got hit with an underpayment penalty the first year because I didn't realize I needed to do this. If you stay in California, definitely set up quarterly estimated payments right away. The FTB is much more aggressive than the IRS about collecting penalties! Also, document everything about where you physically work - California has been known to audit people who claim they've moved to Nevada but still actually work in California.
Has anyone addressed the currency exchange risk yet? I worked for a UK company from the US and the salary looked great until the pound dropped 18% against the dollar over 6 months. Suddenly I was making way less than expected.
Good point. I negotiate a USD equivalent with my foreign employer that gets adjusted quarterly. Protects against big swings. Swiss franc is usually pretty stable tho.
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My two cents as someone who went through this last year: don't overcomplicate it. If you're only making a few hundred bucks per event, a single-member LLC is probably overkill, let alone a multi-member one with 10 people. Have you considered just operating as a sole proprietor and tracking your business income/expenses separately? You can still get a business bank account as a sole proprietor with just an EIN. Then you could just pay your friends as contractors or have an informal profit-sharing arrangement. The paperwork and annual fees for maintaining an LLC in most states might not be worth it for occasional parties. If you do decide to grow it into something bigger, you can always form an LLC later.
Wouldn't I still be personally liable as a sole proprietor though? That's my biggest worry - if someone gets hurt at one of our events or something else goes wrong, I don't want to risk my personal assets.
Yes, you would be personally liable as a sole proprietor - that's the main drawback. If liability protection is your primary concern, then an LLC does make sense. In that case, I'd still recommend keeping it as simple as possible with a single-member LLC unless your friends are insisting on being official partners. Make sure you get proper event insurance regardless of your business structure. Even with an LLC, if something goes wrong at an event, having good insurance is often more practically important than your business structure, especially for small businesses where people sometimes accidentally "pierce the corporate veil" by mixing personal and business finances.
Has anyone mentioned S-Corps yet? If this event business starts making decent money, you might want to look into an S-Corp election down the road. You can start as an LLC and then elect S-Corp status later. The advantage is potentially saving on self-employment taxes since you can pay yourself a reasonable salary and take the rest as distributions that aren't subject to SE tax. But it's only worth it once you're making enough profit to offset the additional paperwork and accounting costs.
S-Corps are so overrated for small businesses. The accounting and payroll costs eat up any tax savings unless you're clearing like $75k+ in profit. Plus you have to run actual payroll every month which is a pain.
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Have you tried looking at FreeTaxUSA's help articles? They have a whole section dedicated to self-employment and 1099 income. I found it super helpful last year when I was filing as a freelancer for the first time. Just click the question mark icons throughout the software or search their knowledge base.
I tried looking at their help articles but they're not very detailed about my specific situation with multiple 1099s. Did you have multiple income sources? Also, did you find their interface for business expenses intuitive?
I had three different 1099s last year from different clients. Their help articles on combining multiple 1099 forms on Schedule C were really helpful. You just need to enter each 1099 separately, and the software combines them correctly. For business expenses, I wouldn't call it super intuitive, but it's organized by categories that match the Schedule C form. The trick is to pre-categorize your expenses before you start (office supplies, software, equipment, etc.). Make a spreadsheet first with everything sorted, then the data entry goes much faster.
FreeTaxUSA has been my go-to for years and I'm a freelancer too. One tip - don't overthink the business expenses. Just create general categories like "office supplies" ($345), "software subscriptions" ($1,290), etc. You don't need to enter every single receipt unless you want to. For quarterly taxes, after you finish this year's return, it will generate vouchers with suggested payment amounts. Just make sure to calendar the due dates (April 15, June 15, Sept 15, Jan 15). I set reminders on my phone 2 weeks before each one.
Do you pay the quarterly estimates online or mail in the vouchers? I've been confused about which is better.
Omar Hassan
I just called the IRS Practitioner Priority Service about this exact question last week! The agent confirmed that Form 8809 doesn't require a 2848 for preparers to sign. They explained that information return extensions are considered "ministerial acts" that don't require formal representation authorization.
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Chloe Robinson
•How long did it take you to get through to the Practitioner line? Last time I tried it took me over 2 hours of waiting...
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Diego Chavez
For what it's worth, I've been filing 8809 extensions for clients for years without a 2848 and never had an issue. The IRS is mostly concerned that the extension gets filed on time. Just make sure you have your EFIN or PTIN on the form as required. Also, remember that Form 8809 gives an automatic 30-day extension for 1099-NEC now - you don't even need to provide a reason for the extension request!
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Amina Bah
•Thanks everyone for the helpful responses! This definitely clears things up for me. I'll go ahead and file the 8809 without the 2848 since I already have a service agreement with this client. And I'll look into getting 2848 forms for all my clients going forward as a best practice. Really appreciate all the insights!
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