You might want to double check your state tax withholding too! I fixed my federal but completely forgot about state taxes and got hit with a separate penalty from my state tax agency. Some states are really aggressive about the underpayment penalties.

Don't panic - this is actually pretty common with new jobs! The most likely culprit is how you filled out your W-4. Even small mistakes can result in zero federal withholding. Here's what I'd recommend doing immediately: 1. Contact your HR/payroll department and ask to see the W-4 you submitted. Look specifically at line 4(c) - if you accidentally put a large number there thinking it was for dependents, that could explain the zero withholding. 2. Use the IRS Withholding Calculator on their website (it's free) to figure out exactly what your W-4 should look like based on your income and filing status. 3. Submit a corrected W-4 ASAP. Your employer is required to implement changes by the next payroll period. Since you're catching this early in the year, you should be fine on penalties as long as you fix it soon. The IRS generally doesn't penalize you if you pay at least 90% of your current year tax liability or 100% of last year's (110% if your prior year AGI was over $150k). If you're still worried about owing too much, you can always specify additional withholding on line 4(c) of your new W-4 to be extra safe. Better to get a refund than owe a big chunk in April!

One more thing to consider - tax software is getting better every year at handling small business situations. I've been using FreeTaxUSA for my Etsy shop for years and it's way cheaper than TurboTax but does everything I need.

I'm in a very similar boat - just started my consulting business in late 2024 and made about $2,100. I was also stressing about whether to hire a CPA, but after reading everyone's advice here, I think I'm going to try the DIY route this year too. One thing I learned from talking to other small business owners is that you can always amend your return later if you miss something significant. For our revenue levels, the potential mistakes aren't going to be catastrophic. Plus, going through the process yourself this first year will help you understand your business finances better, which is valuable knowledge as you grow. I'd say save the CPA money for now and put it toward marketing or inventory for your shop instead. That investment is more likely to generate returns at this stage than paying hundreds for tax prep on such a straightforward situation.

One thing nobody has mentioned yet is that there are actually limits on business losses you can claim against other income in a given year. Section 461(l) limits excess business losses for non-corporate taxpayers. For 2023, you can only offset up to $289,000 (or $578,000 if married filing jointly) of non-business income with business losses. Anything above that becomes an NOL carryforward. Also, if your business loses money for 3 out of 5 consecutive years, the IRS might classify it as a hobby rather than a business, and then you lose the ability to deduct those losses against other income entirely.

The way I understand it (as a fellow sole proprietor) is that there's no such thing as a "business loss carryforward" for Schedule C businesses. When you have a loss, it immediately offsets your other income in that tax year. The confusion might be coming from corporations, partnerships and other entities where losses ARE tracked separately. But for sole props, it's all just your personal money - the business doesn't exist as a separate tax entity. That's actually a benefit - you get to use those losses right away instead of waiting for future business profits!

Has anyone dealt with QBI deduction calculations for a short year? Trying to figure out if there are special considerations there.

One thing I haven't seen mentioned yet is the potential impact on retirement plan contributions. If your client has a SEP-IRA, Solo 401(k), or defined benefit plan, the short tax year will affect the contribution limits and deadlines. The contribution limits need to be prorated based on the number of months in the short period. For example, if they have a SEP-IRA and the short period is only 8 months, their maximum contribution would be 8/12 of what it would normally be. This could significantly impact their tax planning strategy, especially if they were counting on making large retirement contributions to reduce their tax liability. Also worth checking if they have any existing installment agreements with the IRS for estimated taxes - those will need to be recalculated for both the short period and the new tax year going forward. The IRS is usually accommodating about adjusting payment schedules if you're proactive about notifying them of the change.

I'm 24 and just did my own taxes for the first time using TurboTax. Is it normal that it took me like 3 whole days to figure it out??? Everyone says it's "easy" but I kept second-guessing everything.

Don't feel bad about taking your time - doing taxes right is way better than doing them fast! I've been doing my own for about 8 years now and still sometimes spend a weekend on them when I want to make sure I'm not missing anything. The second-guessing is totally normal, especially for deductions. I keep a little tax folder throughout the year now where I throw receipts and documents as I get them. Makes tax time way less stressful when everything's already organized. Pro tip: if you're using TurboTax, they have a "review" feature at the end that double-checks everything and explains why certain things were included/excluded. Really helped build my confidence in the early years!