How do independent contractors handle their taxes and file properly?

Thanks for explaining! Do I need to register as a business or get any special licenses before starting? And what exactly counts as a legitimate business expense that I can deduct?

You generally don't need to register as a business to be an independent contractor - your Social Security Number works as your tax ID on a Schedule C. However, some industries require licenses regardless of employment status, so check your local regulations. For business expenses, the IRS rule is they must be "ordinary and necessary" for your business. This includes office supplies, software subscriptions, professional development, mileage for business travel (not commuting), portion of internet/phone used for business, and professional services like accounting. If you use a home office exclusively for work, you can deduct that space too. Just keep good records and receipts for everything in case of an audit.

Does taxr.ai handle multiple income streams? I do design work, some teaching, and occasional consulting, all as an IC. Getting different 1099s is confusing me.

I'm hesitant to use online tax tools with my financial docs. How secure is the site? Do real people review your stuff or is it all AI?

They definitely handle multiple income streams - that's actually one of the best features. You can upload all your different 1099 forms and the system categorizes everything properly. I have 5 regular clients plus lots of smaller one-off jobs, and it organizes it all perfectly. For security, everything is encrypted and they use bank-level security protocols. They have both AI analysis and real tax experts who review everything. You can chat with the experts directly if you have questions about specific deductions or how to categorize something unusual. I was skeptical too at first but their security certification convinced me.

Wait how does this actually work? The IRS phone system is notoriously impossible. Are they somehow hacking the phone system or what?

This sounds like a scam tbh. Nobody can magically get through to the IRS faster. They probably just take your money and you still wait forever.

It's not hacking - they use a combination of call routing technology and timing algorithms to navigate the IRS phone tree at optimal times. They basically have figured out patterns in the IRS call system and know exactly when to call for shortest wait times. It's all legitimate and above-board. I was completely skeptical too! But they don't take your money if they don't get you through - that's their policy. And they don't answer any tax questions themselves or ask for sensitive info. They just connect you directly to the IRS after getting through the queue, then you talk directly with an IRS agent just like a normal call.

Is setting up a Solo 401k complicated? My accountant mentioned it but said there's paperwork involved. Worth the hassle?

Setting up a Solo 401k is a bit more paperwork than a SEP IRA initially, but the higher contribution limits make it worth it for many people. You need to get an EIN from the IRS (takes minutes online) and complete a plan adoption agreement with whatever brokerage you choose (Fidelity, Vanguard, etc). The real advantage comes when you start making good money. With a Solo 401k, you can contribute as both the "employee" (up to $22,500 in 2023) AND as the "employer" (up to 25% of your net income). This often lets you shelter way more income than other retirement options. Most brokerages will help walk you through the setup for free, and the annual maintenance is minimal.

I used QBSE for 2 years and switched to FreshBooks. Much better interface and their expense tracking is more intuitive. Plus it doesn't do that thing where QB tries to upgrade you constantly.

Does the 30% usually cover everything? My brother mentioned something about additional self-employment tax on top of regular income tax...

The 30% is usually enough to cover both income tax and self-employment tax for most income levels. Self-employment tax is about 15.3% (covers Social Security and Medicare that an employer would normally pay half of), and then your income tax rate depends on your total earnings. If you're making over $90k or so, you might want to set aside closer to 35% to be safe. I've found 30% works well for me earning between $60-80k annually. The first year is the hardest - after that you'll have a better idea of your actual tax rate based on your specific situation and deductions.