Filing taxes for self-employment income as a first-time freelancer

Thanks for the info! Quick question - how do I figure out how much I should be paying for those quarterly taxes? And if I haven't paid any yet, should I just wait until I file my regular taxes now or try to make a payment ASAP?

To estimate your quarterly tax payments, the simplest method is to take your expected annual self-employment income, multiply by about 30% (15.3% for self-employment tax plus your income tax rate), then divide by 4 for each quarter. There are more precise calculations, but this gives you a ballpark figure. If you haven't made payments yet, you can make your final quarterly payment for 2024 by January 15th, 2025. This won't eliminate penalties on the earlier missed payments, but it reduces further penalties and interest. When you file your return, you'll use Form 2210 to calculate any underpayment penalty. The good news is many first-time self-employed people miss these payments, and the penalties are usually manageable - think of it as a small "learning fee" as you figure out the system.

Does it actually help with estimating those quarterly payments? That's what I'm struggling with the most. I've been freelancing for 9 months and have no idea if I'm putting aside enough.

I'm skeptical about these tax tools. How accurate is it really? I tried one last year and it missed a lot of deductions my accountant found later.

Yes, it actually calculates your quarterly estimated payments based on your current income and projected earnings. It gives you the exact amount to pay each quarter and even helps you set up payment reminders so you don't miss deadlines. Regarding accuracy, I was skeptical too after trying other tax tools. The difference is taxr.ai uses actual AI to analyze your specific situation rather than just a form-filler. I double-checked its recommendations with a tax professional friend and he was impressed with how thorough it was, especially with self-employment deductions like home office, mileage, and business expenses. It found legitimate deductions other software missed because it actually reviews your bank and payment processor statements.

How does that even work? The IRS barely even answers calls. I spent 3 hours on hold last month and got disconnected.

This sounds too good to be true. The IRS is impossible to reach. I'm calling BS - no way this actually works during tax season when everyone's trying to get through.

It works by using an automated system that navigates the IRS phone tree and stays on hold for you. They have dedicated lines that continuously call and wait on your behalf. When an agent finally answers, their system connects the call to your phone immediately. It's basically like having someone else do the waiting for you. The reason it works even during busy times is because they're persistent - if one attempt fails, their system keeps trying throughout the day. I was skeptical too until I got a call back with an actual IRS agent on the line. It's especially useful for self-employment questions because those often require talking to a specialist, which means even longer wait times. During tax season it might take longer, but it still works - you just go about your day without being stuck on hold.

I had no idea this was even an option! Do you just set these up yourself or do you need an employer to do it? And is there a deadline to open one?

You set it up yourself! Since you're self-employed, you're both the employer and employee for retirement purposes. For a SEP IRA, you can open one online through places like Vanguard, Fidelity, or Schwab in about 15 minutes. For the deadline, you can actually open and fund a SEP IRA up until your tax filing deadline - including extensions. So for 2024 taxes, you have until April 15, 2025, or if you file an extension, all the way until October 15, 2025. This is super helpful because you can calculate your exact tax situation before deciding how much to contribute. The Solo 401k has slightly different rules and deadlines, but the SEP is probably simplest for your situation.

I use QuickBooks Self-Employed and it's been a lifesaver. It connects to your bank accounts and PayPal, automatically categorizes expenses, tracks mileage, and calculates quarterly taxes. Costs like $15/month but worth every penny for the headache it saves at tax time.