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Carryback claims are actually a good thing usually! The IRS is probably giving you money back from your 2020 taxes because of pandemic relief provisions. During COVID they changed a bunch of rules retroactively and they're STILL processing all those changes. The delay is totally normal - the IRS has been massively backed up since COVID. My mom just got a similar notice last month about her 2019 taxes and ended up getting an extra $1200 refund she never expected.
Thank you all for the explanations! I called the number on the notice today (took forever to get through) and you were right - it was actually GOOD news. They found I was eligible for some additional pandemic relief I didn't claim and they're sending me $790! Apparently there was some provision about carrying losses back that I qualified for but didn't know about. The agent explained that they're still processing these adjustments from the CARES Act and I just happened to be in this batch. I was so worried they were coming after me for something, but it was actually them giving me money back. What a relief!
That's great news! The IRS isn't always the bad guy (though their communication could definitely use some work). Glad it worked out in your favor!
Check if it's a legitimate notice first - lots of IRS scams going around. Real IRS notices have a notice number (usually CP followed by numbers) in the top right corner and will NEVER ask for gift cards, cryptocurrency or personal info over the phone.
When I was in ur situation I just put "EXEMPT" on my w4 (there should be a place for this on the form). That way they don't take any federal taxes out at all. Just be aware they'll still take out Social Security and Medicare taxes no matter what (those are different
Unrelated to the withholding question, but make sure your parents understand how claiming you impacts their taxes vs you filing independently. Sometimes parents claim kids without actually running the numbers both ways. In some situations, it might be better overall if they don't claim you, but you'd need to talk with them about it.
This happened to me once and turned out to be related to a phone my wife bought that was added to our family plan. The phone itself was billed to the phone carrier account but for some reason the sales tax posted separately to my credit card. Check if anyone else in your household might have made a purchase?
I actually live alone and don't have any shared accounts with family members. I've never even had a family phone plan - always just had my own individual account. That's what makes this so confusing. There's literally no legitimate reason I should be seeing this charge.
In that case, it definitely sounds like fraud. One other possibility - did you recently buy anything online where you paid through PayPal or another payment service? Sometimes the merchant will process the main payment through the service but charge taxes separately directly to the card.
Watch out for what happens next! These small tax charges are often "test charges" by fraudsters. If they go through without being disputed, they'll hit you with much larger charges. I'd recommend: 1) Dispute the charge immediately 2) Ask for a new card number 3) Check your credit reports at all three bureaus 4) Set up fraud alerts and credit freezes Don't wait on this - I learned the hard way and ended up with $3000 in fraudulent charges after ignoring a strange $15 tax charge.
This is exactly what happened to my sister. Small weird tax charge, then boom - two weeks later her card was maxed out with purchases from electronics stores across the country. Definitely get a new card number ASAP.
For your situation, I'd recommend using the 100% prior year tax liability safe harbor. Since you only owed $1,400 for 2023, you could simply divide that by 4 and pay $350 per quarter for 2024. That would guarantee no penalties even if your income jumps to $40k. If you want to be more precise, estimate your 2024 tax liability (including self-employment tax which is about 15.3% of your net profit) and divide by 4. Remember that quarterly due dates are April 15, June 15, September 15, and January 15 (2025). You can pay online through the IRS Direct Pay system which is free and pretty straightforward.
Isn't the June payment actually due on June 17th this year? I thought I saw something about that online. And do I calculate the self-employment tax separately or is there a combined form or calculator?
You're right about the June deadline this year - it's June 17, 2024 (the 15th falls on a weekend). Good catch! For calculating your payments, the self-employment tax is actually part of the total tax calculation on the 1040-ES worksheet. You don't need to calculate it separately for your quarterly payments. The worksheet walks you through calculating both your income tax and self-employment tax, then combines them to determine your total estimated tax payments. This ensures you're covering both your income tax and SE tax obligations with your quarterly payments.
Quick tip that saved me a ton of stress: set up an IRS online account if you haven't already. It lets you see your payment history, make payments, and set up payment plans. Makes the whole quarterly tax thing so much easier to manage. I had the same issue last year - started contracting midyear and was confused about quarterly requirements. I just divided my expected annual tax by 4 and paid each quarter. As long as you're making a good faith effort, the IRS is fairly reasonable.
Klaus Schmidt
Fellow illustrator here! One thing that saved me when I had a similar situation was going through my email for digital receipts. Check your inbox for: - Adobe subscription payments - Art supply store order confirmations - Computer/tablet/hardware purchases - Online course payments - Website hosting fees Also check your social media DMs if you arrange client work there. My Instagram DMs had tons of evidence of client negotiations that helped prove income sources. And don't forget apps like Venmo or Cash App if you've used those!
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Aaliyah Jackson
ā¢Thank you so much for these specific suggestions! I never thought to check my email archives but I just did a quick search and found at least 15 receipts for art supplies I'd completely forgotten about. Found records of my Procreate purchase, Clip Studio subscription, and even some drawing tablet accessories. Do you think PayPal's reports will show both my income AND my business expenses if I purchased them through PayPal? Or do I need to sort that out separately?
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Klaus Schmidt
ā¢PayPal reports will show all your transactions, but they won't distinguish between personal and business expenses automatically. You'll need to go through and identify which purchases were for your illustration work. Your PayPal 1099 only reports your income received through PayPal, not your expenses. I'd recommend downloading your PayPal transaction history for the full year and sorting it in a spreadsheet. Look for payments to art supply stores, software companies, and other business-related vendors. Flag those as potential deductions, then verify with any email receipts you can find to confirm the purpose of each purchase.
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Aisha Patel
Don't ignore your taxes!! I did that for two years as a freelancer and ended up owing over $15,000 with penalties and interest. The IRS eventually garnished my bank account and it was a NIGHTMARE to fix. Even filing with estimates is way better than not filing at all. And definitely set up quarterly estimated tax payments going forward - that was my big mistake, thinking I could just pay it all at the end of the year.
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LilMama23
ā¢Exactly this! I wasn't just hit with the taxes I owed but also a 25% failure-to-file penalty PLUS interest that kept growing. The IRS is actually pretty reasonable if you file on time and work with them, even if you can't pay right away. It's when you don't file that they get aggressive.
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