Do I have to file Form W-2 together with 1099-K or can I file them separately?

Oh that makes sense now. So with my W-2 income already taking up the lower tax brackets, my eBay income is basically getting taxed at a higher rate because it's stacked on top? And I didn't realize there were additional self-employment taxes on the eBay stuff. Is there anything I can do to reduce what I owe? I kept all my receipts for inventory purchases and shipping supplies, but are there other business expenses I might be missing?

Yes, exactly - your eBay income is "stacked" on top of your W-2 income, potentially putting some of it in higher tax brackets. Plus the self-employment taxes which are significant. For reducing what you owe, make sure you're claiming all legitimate business expenses. Beyond inventory and shipping supplies, consider mileage for post office trips, a portion of your internet/phone if used for business, home office deduction if you have a dedicated space, packaging materials, online selling fees, printer ink/paper, storage solutions for inventory, and even a portion of your computer if primarily used for your business. Also, you might qualify for the Qualified Business Income deduction, which could reduce your taxable income by up to 20% of your net business profit.

Does taxr.ai actually work with the online selling platforms directly? Like can it pull data from my eBay account to match sales with expenses? I'm trying to avoid manually matching hundreds of transactions.

I'm a bit skeptical about services like this. How do you know they're not just trying to get you to claim sketchy deductions that might trigger an audit? And is it really worth the cost compared to just using regular tax software?

It doesn't connect directly to eBay, but you can upload your eBay sales reports and it will match them with your bank/credit card transactions to identify expenses related to your business. I found this super helpful since I had hundreds of small purchases throughout the year. Regarding audit concerns, it's actually very conservative with recommendations. It flags expenses as "safe," "questionable," or "risky" based on IRS guidelines, and explains why certain deductions might raise red flags. It's not about finding sketchy deductions - it's about finding legitimate ones you might have missed. And considering it saved me over $900 in taxes by identifying legitimate deductions I had overlooked, it was definitely worth it for me.

Wait, how exactly does this work? Does someone else talk to the IRS for you? I'm confused about how a service can get through when I can't.

This sounds like BS honestly. The IRS phone system is designed to limit calls - there's no way around that. How could a third party service possibly get through when millions of taxpayers can't? Sounds like a scam to me.

No one talks to the IRS for you. The service uses an automated system that continually redials the IRS and navigates through the phone menu options for you. Once it actually connects with a live IRS agent, it calls your phone and bridges the connection. You're the only one who speaks with the IRS agent - Claimyr just handles the frustrating part of waiting on hold and getting through the phone tree. It works because their system can make continuous automated calls and navigate the IRS phone system 24/7, which is something you couldn't realistically do yourself. It's not bypassing any systems - it's just automating the redial process that you'd otherwise have to do manually. The IRS doesn't limit how many times you can call, they just don't have enough agents to handle all calls.

Thanks for the extra info! The tax software did have me fill out those schedules, but I wasn't totally clear on what they were for. How do the quarterly estimated payments work? Is there a minimum amount I need to earn before I'm required to make them? And how do I calculate how much to pay?

Generally, you should make estimated tax payments if you expect to owe $1,000 or more when you file your return. The IRS wants you to pay as you earn throughout the year, not just at tax time. To calculate your payments, you have two options: You can pay 100% of last year's tax liability (110% if your income is over $150,000), divided into four equal payments. This is the safest method to avoid underpayment penalties. Or you can estimate your current year's tax and pay it in quarterly installments, which might be more accurate if your income changes significantly. The IRS Form 1040-ES has worksheets to help you calculate this. Payments are due April 15, June 15, September 15, and January 15 of the following year. You can pay online through the IRS Direct Pay system.

Yeah, it's confusing! The threshold was supposed to drop to $600 for 2023, but the IRS delayed it. For 2023 tax returns (what we're filing now in 2024), the threshold is still $20,000 AND 200 transactions. In 2024 (for next year's taxes), it'll be $5,000 with no transaction minimum. Then in 2025, it'll finally go down to $600. But some states have their own lower thresholds, and some platforms might be issuing 1099-Ks at lower amounts anyway just to be safe. Super confusing!