Form 8995: Why am I being asked to fill it out when using TurboTax?

Oh that makes so much more sense! So it's actually a good thing that might lower my taxes? I had no idea that doing Instacart for a few weeks would make me count as "self-employed" in the eyes of the IRS. When you say net profit, does that mean I can subtract expenses like gas and mileage from the $825 before calculating that 20%? I didn't keep great records but definitely spent some of that money on gas driving around.

Yes, it's definitely a good thing that could lower your taxes! Any time you do gig work like Instacart, Uber, DoorDash, etc., the IRS considers you self-employed for that portion of your income. Absolutely, you should subtract all your legitimate business expenses before calculating the 20% deduction. Mileage is a big one for delivery gigs - for 2022 you can deduct 58.5 cents per mile (Jan-June) and 62.5 cents per mile (July-Dec). Even without perfect records, make a reasonable estimate of your mileage. You can also deduct portions of your phone bill, insulated bags, and other items directly related to your Instacart work.

Does this actually work for figuring out if you're filing things correctly? I'm doing taxes for the first time with some freelance income (~$5k) alongside my regular job and TurboTax keeps trying to upsell me on their Self-Employed version which is like $120 extra.

I'm suspicious of tax tools outside the major providers. How do you know this site gives accurate advice? Last thing I want is to get audited because some random website gave me bad info about deductions.

It absolutely works for checking if you're filing correctly. The tool analyzes your specific situation and tax documents, then gives personalized guidance. For your $5k freelance situation, it would show exactly which forms apply to you and what deductions you qualify for - which means you might not need to pay for the expensive upgrade. I was skeptical at first too, but the site isn't actually filing your taxes - it's just analyzing your documents and explaining what you need to know in plain English. Their explanations cite the actual IRS rules, so you can verify everything. I double-checked their recommendations against the IRS website and everything matched up. It's basically like having a tax expert explain your situation without the $200+ hourly fee.

Wait, how does this actually work? Does someone else wait on hold for you and then call you when they reach a person? That seems too good to be true considering how impossible it is to reach the IRS.

Yeah right. No way this actually works. The IRS is completely unreachable - I tried calling 8 times last tax season about a similar issue and never got through. If there was a service that could actually get through to IRS agents, it would be all over the news.

It uses a system that basically waits in the IRS phone queue for you. When they reach an agent, you get a call connecting you directly to that agent. It's like having someone else sit on hold so you don't have to waste hours with your phone stuck on speaker. This 100% works - that's why I shared it. I was just as frustrated as you after multiple failed attempts. The pandemic made IRS phone lines completely overwhelmed. But when I used this service, I got connected to an actual IRS representative in about 2 hours (while I was doing other things instead of being stuck on hold). The agent confirmed exactly what I needed to do with Form 8995 for my small 1099 income, and I filed with confidence. Definitely not a scam - it literally saved my sanity during tax season.

Wait are you serious?? I thought I was getting a tax break with that 8995 form but now I have to pay EXTRA taxes too? This is getting so complicated. How much will I have to pay on just $825 of Instacart income? I'm already living paycheck to paycheck.

Yes, unfortunately that's how it works. The Form 8995 gives you a deduction that reduces your income tax, but self-employment tax is separate. For $825 in income, you'll need to account for any expenses first. Let's say after deducting mileage and other expenses, your net profit is around $600. The self-employment tax would be about 15.3% of that, so roughly $92. But you do get to deduct half of that self-employment tax on your return, which helps a little. Don't panic though - even with that SE tax, your overall tax situation might still be okay depending on your total income and withholding from your W-2 jobs. TurboTax will calculate it all and show you the final result.

I wouldn't recommend skipping it. Form 8995 actually REDUCES your taxes by giving you a deduction, so skipping it means you'd pay MORE tax than necessary. Your friend's return might have been accepted, but that doesn't mean it was correct. The IRS accepts many returns initially and catches problems later. The QBI deduction is actually a benefit to you - it can reduce your taxable income by up to 20% of your net self-employment profit.

There's no minimum income threshold for the QBI deduction! Even with your $2,800 in freelance income, you're absolutely eligible for it. The deduction is designed to benefit all self-employed individuals, not just big businesses. For your graphic design work, you're looking at potentially deducting 20% of your net profit after expenses. So if you had $500 in legitimate business expenses (software, equipment, home office), your net profit would be $2,300, and you could deduct up to $460 (20% of $2,300) from your taxable income. That's definitely worth the extra form! The complexity really isn't that bad when TurboTax walks you through it step by step. Just make sure you gather all those business expense receipts first like Paolo mentioned - home office, Adobe subscriptions, new computer equipment, etc. Those upfront deductions can really add up and make the 20% QBI deduction even more valuable.

This is exactly what I needed to hear! I've been stressing about whether to pay for the TurboTax upgrade just for this one form. Your point about manually entering the Schedule C and Form 8995 info is really helpful - I had no idea that was even possible with the basic version. The self-employment tax deduction piece is something I completely missed too. So even though I have to pay the extra SE tax, getting to deduct half of it back does make it less painful. Do you remember roughly how long it took you to figure out the manual entry process? I'm worried about making mistakes since this is all new to me, but if it could save me the $120 upgrade fee that would be amazing.