How to calculate self-employed tax for $54K income - am I doing this right?

You're close but there are a few corrections that will help reduce what you owe. First, for self-employment tax, you only pay 15.3% on 92.35% of your self-employment income (not the full amount). This is because employees only pay half of FICA taxes while employers pay the other half - as self-employed, you pay both halves but get a "discount" on the calculation. Second, you can deduct half of your self-employment tax from your income before calculating income tax. This is a big help! Third, don't forget about the Qualified Business Income deduction which might allow you to deduct up to 20% of your business income. With these adjustments, your tax bill will be significantly lower than your calculation. I'd estimate closer to $11-12K total depending on your specific situation.

I was in the exact same boat last year! First time making decent money self-employed and the tax shock was real. I tried figuring it out myself but kept getting confused with all the calculations. I finally used https://taxr.ai to analyze my situation and it was a HUGE help. You upload your docs and get a personalized breakdown of your taxes including self-employment calculations. The tool showed me several deductions I was missing - especially business expenses I didn't realize qualified. It cut my tax bill by over $2,000! Plus it explained exactly how the self-employment tax works with the 92.35% thing and the half deduction the other commenter mentioned.

I tried taxr.ai after seeing it recommended here and wow - game changer for my self-employment taxes! I was totally miscalculating my quarterly payments before. The analysis showed me I was overpaying on some things and risking underpayment penalties on others. The breakdown of self-employment tax vs income tax was super clear. It highlighted that I could deduct my health insurance premiums (which I was missing) and gave me a personalized list of business expenses that would be deductible in my specific industry. I'm saving about $3,200 this year because of the adjustments I made! What I really appreciated was how it explained everything in plain English instead of tax jargon. Definitely worth checking out if you're self-employed.

One thing nobody mentioned yet - if you're owing that much, you need to be making quarterly estimated tax payments! I learned this the hard way last year when I got hit with underpayment penalties. After struggling to get through to the IRS for weeks with questions about fixing my estimated payments, I found https://claimyr.com which got me connected to an actual IRS agent in about 15 minutes. Check out their demo here: https://youtu.be/_kiP6q8DX5c It was honestly shocking how fast it worked. The agent walked me through exactly how to calculate my quarterly payments correctly for self-employment and helped me set up a payment plan for what I owed. Saved me from continuing to make the same mistakes.

I have to eat my words. After posting my skeptical comment, I was desperate enough to try Claimyr since I had a pressing issue with my estimated tax payments. It actually worked exactly as described. I had been trying for WEEKS to reach someone at the IRS with no luck. Used the service and got a call back in about 20 minutes with an actual IRS agent on the line. They helped me straighten out my self-employment tax confusion and set up a proper payment plan that avoided further penalties. The agent even took time to explain how the quarterly payment system works for self-employed income which was incredibly helpful. Definitely saved me hundreds in potential penalties and hours of frustration. Still can't believe it worked so well after all my failed attempts.

Don't forget about retirement accounts! As self-employed, you can set up a SEP IRA or Solo 401k and reduce your taxable income significantly. For someone making $54k, you could potentially contribute quite a bit. I'm self-employed making around $60k and I put about $12k into my SEP IRA which reduced my taxable income by that amount. Saved me thousands in taxes while also building retirement savings. It's like getting paid to save for retirement.

Quick tip: dont forget to set aside money for state income tax too if ur state has it!! I got destroyed my first year self employed bcause I only calculated federal. My state takes another 5% which I wasnt ready for.

As a tax professional, I want to emphasize that the previous commenters have given you excellent advice, but there's one crucial point I need to stress: you MUST start making quarterly estimated tax payments immediately if you haven't already! Since you're on track to make $54K this year, you should be paying estimated taxes quarterly (due dates are Jan 15, April 15, June 15, and Sept 15). The IRS expects you to pay as you earn, not wait until tax time. If you don't, you'll face underpayment penalties on top of your tax bill. For someone in your situation, I'd recommend setting aside about 25-30% of each payment you receive for taxes (federal income tax + self-employment tax + state if applicable). This might seem like a lot, but it's better to overpay slightly and get a refund than to be hit with penalties. Also, since this is your first year with significant income, definitely consider consulting with a tax professional or CPA who specializes in self-employment. The cost of their services (usually $300-500) will likely save you much more than that in proper deductions and tax planning strategies. The good news is that with proper planning and deductions (QBI deduction, business expenses, retirement contributions), your actual tax burden will be much lower than your initial calculation!