Long-time practitioner here. Everyone's giving software advice but honestly, the most important factor isn't which software but how much training you get on it. I've used ATX for 15 years and it handles everything from basic to complex returns, including multi-state and PTE. Look for a software company that offers comprehensive training and excellent support during tax season. ATX may not be as flashy as some others, but their support is top-notch, and that matters more than anything when you're in the middle of a complex return with a deadline looming.

Don't overlook Lacerte if you're planning to grow into complex returns. Yes, it's pricier than Drake, but there's a reason most large practices use either Lacerte or Ultra Tax for complex work. I switched from Drake to Lacerte 3 years ago and would never go back. The time savings on complex returns more than pays for the higher cost. Multi-state returns are much easier, and the PTE handling is stellar. The tax research integration alone saves me hours on tricky situations.

Slightly off topic but important: make sure you're setting aside money for quarterly estimated tax payments next year if you continue the side hustle. The IRS wants you to pay taxes as you earn income, not just at tax time. I learned this the hard way and got hit with an underpayment penalty my first year doing freelance work. Since this is your first year with significant side income, you'll probably be fine for this year due to the safe harbor rules (especially if your W-2 withholding covers your total tax bill), but keep it in mind for next year!

just fyi my spouse started an education consulting side hustle last year and we looked into the llc thing. ended up not being worth it for under 10k in income cause the filing fees + extra tax prep costs ate up the small savings. our tax guy said just having good records of expenses was way more important than the business structure at that income level. we track everything in quickbooks self-employed now, makes schedule c super easy to fill out.

This tax bill definitely seems within the normal range for self-employment. Like others said, you're paying both halves of Social Security and Medicare (15.3%) plus regular income tax. But I wanted to add - you should also be setting up quarterly estimated tax payments for this year to avoid penalties next year! The IRS expects you to pay as you earn throughout the year. If you wait until tax time next year, you'll likely get hit with underpayment penalties on top of your tax bill. You can set this up through the IRS Direct Pay system online. Generally, you should be setting aside 25-30% of your income throughout the year for taxes.

Same thing happened to me last year. Made $81k freelancing and owed about $16k. Self-employment taxes are brutal! You should 100% open a SEP IRA or Solo 401k to reduce your taxable income. You can contribute way more than a regular IRA - like up to 25% of your net earnings or around $61k for 2023 (whichever is less). I put $15k into my Solo 401k last year and it saved me about $3300 in taxes. Plus you're saving for retirement! Also look into the Qualified Business Income deduction - you might qualify for a 20% deduction on your business income.

The most important thing, OP, is to start filing current tax returns correctly going forward. Don't let this year become another unfiled year while you're dealing with the past ones. I say this from experience - each new unfiled year just digs the hole deeper. I made this mistake and ended up with 6 years of unfiled returns. The way I dug out was to: 1) File current year properly 2) Work backwards on the old returns one by one 3) Call the IRS and get on a payment plan Remember that independent contractors should typically be making quarterly estimated tax payments. Set that up right away for 2025 so you don't keep adding to the problem.

Has anyone mentioned the statute of limitations on this? IRS generally has 10 years to collect from the assessment date. If some of these taxes are from 10 years ago, maybe some of this debt is approaching expiration?

Don't forget that you need to file Schedule C for your eBay business and Schedule SE for the self-employment taxes. The tax software should walk you through all this, but just making sure you know. Also, you might want to consider making quarterly estimated tax payments next year to avoid owing a big lump sum (and possible underpayment penalties). Since you've got both W-2 and self-employment income, you'll need to plan ahead. One last thing - if your eBay business continues to be profitable, look into setting up a SEP IRA or solo 401(k) to shelter some of that income from taxes. Could save you a decent amount.

Has anyone else noticed that the 1099-K threshold changed? I thought they were going to require platforms to issue 1099-Ks for just $600 in sales this year, but then they delayed it? I sell on multiple platforms and I'm confused about what triggers a 1099-K now. Some of my platforms sent them and others didn't.