Is there an easy way to figure out how much to pay for those quarterly payments? Our situation involves some rental income on top of our regular jobs, and I think that might be why we keep owing so much.

For rental income, you'll want to estimate your annual rental profit (income minus expenses) and multiply by your tax bracket percentage. Then divide that amount into four equal payments. A simple approach is to take whatever you owed last year and divide by 4 - that's usually enough to avoid underpayment penalties under the "safe harbor" rule. The IRS only requires you to pay 90% of this year's taxes or 100% of last year's tax amount (110% if your income is over $150,000), whichever is smaller. If your rental situation is complex, you might want to consult with a tax professional for the first calculation, then you can handle the quarterly payments yourself going forward.

This is exactly right! The "don't give the government an interest-free loan" advice only makes sense if you're disciplined enough to actually invest that money instead. For many people, slightly overwithholding is a painless way to save.

Thanks for this suggestion! My dispute is actually for about $45,000 so this would apply to me. Do you know if filing this way still preserves all my rights if I later decide to get an attorney involved? And does the simplified procedure still allow the examiner to continue working on my case?

Yes, filing under the simplified procedure (S case) still preserves your rights. The main difference is that S cases have a more informal process and you can't appeal the decision beyond the Tax Court. But that's rarely an issue since most cases settle before trial anyway. And absolutely, the examiner can still continue working on your case even after you file. In fact, once you file the petition, your case gets assigned to an IRS attorney who will often work with your examiner to try to settle the case quickly rather than going to trial. Many people find that filing the petition actually speeds up resolution because it puts time pressure on the IRS to wrap things up.

And make sure to send it CERTIFIED mail with return receipt if you're mailing it! That way you have proof of when you sent it in case there's any question.

I haven't tried FreeTaxUSA yet! Does it have a good interface? My biggest frustration with some of the smaller tax services is that the UI feels like it was designed in 1997 lol.

The interface isn't as fancy as TurboTax or H&R Block, but it's definitely not from the 90s! It's clean and straightforward, just without all the animations and excessive hand-holding. Everything is organized logically and I actually find it faster to use than the big name services. They're especially good with 1099-NEC and other self-employment forms since you don't get routed into "upgrade now!" pages halfway through. Their help content is also surprisingly detailed if you get stuck on something.

I found a workaround last year! If you go through the IRS Free File portal instead of directly to the tax service website, some of them are required to give you the free version even with 1099-NEC forms. There's an income limit though.

I understand your point theoretically, but most regular people aren't investing that extra $50-100 per paycheck. It's just getting spent. For many people, tax refunds function as a forced savings plan. I personally prefer getting a chunk back because otherwise that money would just disappear into my daily spending.

You're making a fair point about the psychological benefit. The math doesn't lie though - if you're getting $3000 back, that's $250 per month you could have had in your pocket. Even if you just put that in a high-yield savings account at 4%, you'd earn an extra $70+ over the year. Not life-changing but still better than giving it to the government for free. The real solution is to improve financial discipline rather than using the tax system as a savings account.

I noticed this too! I was getting a really low refund and right after showing me that number, they immediately tried to sell me audit defense for an extra $49.99. Seems predatory to me.

That's exactly what happened to me! It honestly feels like they're using scare tactics. When I went through the same info with FreeTaxUSA instead, I got a much higher refund estimate without all the upsell attempts. I'm never using TurboTax again.

That's actually a really good point I hadn't thought about. I did fill out a new W-4 when our company changed payroll providers last March. I should check my recent paystubs to see if the withholding amounts look right. Do you know if there's an easy way to calculate what my proper withholding should be?

The IRS has a Tax Withholding Estimator tool on their website that's pretty helpful. You enter your income, filing status, dependents, and some other basic info, and it tells you how to fill out your W-4 for the right amount of withholding. If you find that your employer made an error in processing your W-4, definitely talk to your payroll department right away to fix it for this year. Unfortunately, that won't help with what you owe for 2024, but at least you won't have the same problem next year.

That makes sense about refunds just being your own money. I guess I've always used tax refunds as a forced savings plan, so it was a shock to owe instead. How do you figure out how much to pay for quarterly estimated taxes? Is there a simple formula or percentage I should follow for freelance work?

For quarterly estimated taxes, a safe harbor approach is to pay either 100% of last year's tax liability (110% if your income is over $150,000) or 90% of your current year's anticipated liability, whichever is less. This helps you avoid underpayment penalties even if your income fluctuates. For freelance work specifically, a rough calculation is to set aside about 30% of your net profit for taxes - this covers both income tax and self-employment tax. The actual amount varies based on your total income, filing status, deductions, etc. The IRS Form 1040-ES includes worksheets to help calculate the exact amount, or you can use tax planning software to get more precise figures.