Earned about $40,000 cash all year - no estimated tax payments - what will I roughly owe?

Title: Earned about $40,000 cash all year - no estimated tax payments - what will I roughly owe? 1 I've been freelancing all year and made approximately $40,000 in cash payments from January through December. I didn't make any quarterly estimated tax payments during any of the payment windows this year (big mistake, I know). My work setup is that I use part of my apartment as a dedicated home office. I have expenses like a business-only cell phone and internet service that I use for work. Bought some basic office stuff too - desk organizer, notebooks, pens, that kind of thing - probably around $450 total for the year. I don't have health insurance right now and haven't put anything into retirement accounts. Most of my money just goes to rent and regular bills. I've been putting some aside in two different savings accounts, with one specifically labeled "for taxes" because I had a feeling I'd need it! What kind of tax hit am I looking at? Can give more details if needed to get a better estimate.

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18 comments

Sara Unger

•8M

12 Since you earned $40,000 as self-employment income and didn't make any estimated tax payments, you'll need to prepare for both income tax and self-employment tax. For self-employment tax, you'll pay approximately 15.3% on your net earnings (your income minus business expenses). Since you have legitimate business expenses like a portion of your home used exclusively for business, dedicated cell phone, internet, and office supplies, these will reduce your taxable income. The home office deduction could be significant if you use a specific area exclusively for work. For federal income tax, after taking the standard deduction ($13,850 for single filers in 2024), your taxable income will be reduced. Based on rough calculations, you're likely looking at owing somewhere between $8,000-$10,000 total (combining income tax and self-employment tax), depending on your exact deductions. Since you didn't make estimated payments, you may also face an underpayment penalty, though this is usually relatively small.

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Sara Unger

•8M

12 The home office deduction absolutely applies to renters. If you're using 25% of your apartment exclusively for business, you can deduct 25% of your rent and utilities. Just make sure that space is used solely for business purposes. Regarding the quarterly payments, the IRS won't come after you with pitchforks, but you will likely face an underpayment penalty. It's calculated based on how much you should have paid and how late the payments are. For your income level, it might be a few hundred dollars. The good news is you can avoid this in the future by making quarterly estimated payments of about 25-30% of your income each quarter.

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Sara Unger

•8M

7 I went through almost the exact same situation last year and was freaking out about owing a ton. I tried doing my taxes myself but got confused with all the self-employment stuff and home office calculations. I ended up using this AI tax assistant at https://taxr.ai where you can upload your documents or just tell it your situation, and it gives you a breakdown of everything. The tool showed me deductions I didn't even know I qualified for with my home office setup. It identified that I could deduct part of my internet, electricity, and even some furniture I bought for my workspace. It also calculated my self-employment tax correctly and showed me exactly how much I'd need to set aside for quarterly payments going forward.

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Sara Unger

•8M

7 The accuracy was impressive - I actually did have an accountant friend look it over afterward, and they confirmed the calculations were correct. The tool cited specific IRS publications for each deduction it recommended, which gave me confidence. For mixed income situations, it handles both W-2 and freelance income really well. You just upload or enter all your income sources, and it separates everything properly. It even suggests the optimal way to allocate certain expenses between personal and business use to maximize your deductions while staying within IRS guidelines.

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Sara Unger

•8M

18 Just wanted to follow up about my experience with https://taxr.ai since I was skeptical at first. I finally tried it this weekend, and I'm honestly impressed. It found about $3,200 in deductions I would have missed on my own - particularly with how it calculated my home office deduction. The system walked me through exactly which portion of my expenses were deductible, and explained each calculation clearly. It even created a worksheet showing exactly how much I would owe and gave me a payment plan option for my estimated taxes going forward. The penalty calculator for missing my quarterlies was eye-opening but at least now I know how to avoid that next year.

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Sara Unger

•8M

5 If you're worried about those penalties from not making estimated payments, you might want to contact the IRS directly to see if you qualify for any first-time penalty abatement. I tried calling them about a similar situation last year and spent DAYS trying to get through. Finally used a service called Claimyr (https://claimyr.com) that got me a callback from the IRS within a couple hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c. They basically navigate the IRS phone system for you and reserve your spot in line so you don't have to stay on hold forever. The IRS agent I spoke with explained that since it was my first time dealing with self-employment taxes, I qualified for first-time penalty abatement, which saved me about $420 in penalties. Definitely worth the call.

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Sara Unger

•8M

5 It's absolutely not a scam - it's just a clever system that navigates the IRS phone tree and holds your place in line. When an agent becomes available, they connect you directly. The IRS has an official callback feature, but it's only offered when wait times are below a certain threshold, which is rarely the case these days. I had the same skepticism initially! But the service doesn't ask for any tax details or sensitive information - they just need your phone number to transfer the call to you when an IRS agent comes on the line. They don't act as an intermediary during your actual conversation with the IRS.

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Sara Unger

•8M

14 I need to apologize for calling Claimyr a potential scam. I was desperate after trying to call the IRS for weeks about my missed estimated payments, so I gave it a shot yesterday. Within 90 minutes, I got a callback from an actual IRS agent! The agent reviewed my situation and confirmed I qualified for first-time penalty abatement since I'd never had issues before. The whole process took about 15 minutes once I got the agent on the phone, and they processed the abatement immediately. My penalty would have been around $550, so this was definitely worth it. I'm still paying the taxes I owe, but at least I'm not getting hit with those extra penalties.

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Sara Unger

•8M

8 Illinois has a flat income tax rate of 4.95% for all income types, including self-employment. Unlike some states, Illinois doesn't have a separate self-employment tax (just the state income tax). You'll need to file an IL-1040 along with your federal return. Illinois does have underpayment penalties similar to the federal ones, but they're typically smaller. If you qualify for the federal first-time abatement that others mentioned, you might be able to request similar relief from Illinois by attaching a letter explaining your situation when you file.

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