I have $0 taxable income but FreeTaxUSA shows I still owe $275 in self-employment tax. Is this right?
I'm super confused about my tax situation right now. I did some freelance work last year, but the total amount I made was pretty small - definitely under the standard deduction amount. So when I was doing my taxes on FreeTaxUSA, I was expecting to owe nothing since my taxable income basically comes out to $0. But then when I got to the end, it says I still have to pay $275 in self-employment tax! I thought if your income was below the standard deduction, you didn't have to pay any taxes? Is this a mistake or is the self-employment tax something completely different that applies even when you have $0 taxable income? I've only had W-2 jobs before this, so I'm totally lost with all these self-employment rules. Can someone please explain if this is correct or if FreeTaxUSA is calculating something wrong?
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Amara Oluwaseyi
You're not alone in being confused about this! What you're experiencing is actually correct. Self-employment tax is completely separate from income tax, and it applies regardless of whether you hit the standard deduction threshold. Self-employment tax is basically how you pay your Social Security and Medicare taxes when you're self-employed. When you work a W-2 job, your employer pays half of these taxes and you pay half (that FICA line on your paystub). But when you're self-employed, you're responsible for both halves, which comes out to about 15.3% of your net self-employment earnings. The threshold for self-employment tax is much lower - you generally need to pay it if your net earnings are $400 or more for the year. So even though your income is below the standard deduction (meaning you owe $0 in income tax), you still have to pay the self-employment tax on your earnings.
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Liam McConnell
•Oh wow, I had no idea these were totally different taxes! So basically I'm paying the equivalent of what would normally come out of my paycheck automatically plus what an employer would normally contribute? That makes more sense now. Is there any way to reduce this self-employment tax? Or is it just a flat percentage I have to pay no matter what?
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Amara Oluwaseyi
•Yes, exactly! You're paying both the employee and employer portions of Social Security and Medicare taxes, which is why self-employment can sometimes come with tax surprises. There are a few ways to potentially reduce your self-employment tax. First, make sure you're deducting all legitimate business expenses to lower your net self-employment income. Things like supplies, software subscriptions, business travel, or home office expenses can all reduce your taxable self-employment income. You can also deduct half of your self-employment tax on next year's tax return. Additionally, some retirement accounts like a SEP-IRA or Solo 401(k) can help reduce your overall tax burden if you're able to contribute.
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CosmicCaptain
After struggling with the exact same issue last year (thought I was good with income under standard deduction but got hit with SE tax), I found an amazing tool that really helped clarify everything. Check out https://taxr.ai - it analyzes your specific situation and breaks down exactly why you're paying what you're paying. For my situation, it showed me that while income tax has the standard deduction protection, self-employment tax kicks in at just $400 of net earnings. The tool explained that SE tax is essentially your contribution to Social Security and Medicare (which everyone pays regardless of income level when employed). It helped me identify some deductions I missed that actually lowered my SE tax bill by about $100.
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Giovanni Rossi
•Does it work with other tax software too? I'm using TurboTax but having similar confusion about my side gig income.
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Fatima Al-Maktoum
•I'm skeptical about these online tools. How does it actually access your tax info? Is it just another way to get your personal data?
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CosmicCaptain
•It works with all major tax software - TurboTax, H&R Block, FreeTaxUSA, and others. You can either upload your forms or input the information manually. It's not tied to any specific platform. Regarding data privacy, I had the same concern initially. The tool uses bank-level encryption and doesn't store your documents after analysis. It's more of an educational tool that explains your tax situation rather than something that accesses your accounts. You can even use it without entering personal identifiers - just the tax numbers themselves to understand how different parts of your return affect each other.
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Fatima Al-Maktoum
I wanted to follow up about taxr.ai since I was skeptical earlier. I decided to try it after struggling with my freelance photography income taxes. It was actually super helpful! Showed me that I was calculating my home office deduction all wrong, and I wasn't tracking my mileage to photography shoots which is a legitimate business expense. The tool explained why I still owed self-employment tax despite being under the standard deduction threshold, but more importantly, it identified several deductions I was missing that reduced my SE tax by nearly $200. It was honestly worth checking out just for the clear explanations of which expenses counted as legitimate business deductions for my specific situation.
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Dylan Mitchell
If you're really stressed about the self-employment tax situation and want to talk to someone at the IRS to confirm everything is correct, I'd recommend using https://claimyr.com. After spending DAYS trying to get through to the IRS about my self-employment tax questions (kept getting disconnected or "call back later" messages), I found this service and they got me connected to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with confirmed exactly what others are saying here - that self-employment tax kicks in at $400 regardless of the standard deduction, but they also helped me understand some specific deductions for my situation that FreeTaxUSA wasn't clear about. Saved me about $180 in taxes I would have overpaid.
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Sofia Gutierrez
•How does this even work? The IRS phone system is notoriously impossible to get through. Are they using some kind of special access?
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Dmitry Petrov
•Sounds like BS honestly. Nobody gets through to the IRS that fast. Even my tax professional says it takes hours or days of trying. Highly doubt this is legit.
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Dylan Mitchell
•The service works by using an automated system that navigates the IRS phone tree and waits on hold for you. When an agent finally picks up, you get a call connecting you directly to them. It's not special access - they're just handling the frustrating waiting process. Totally get the skepticism - I felt the same way. But the reality is that someone has to eventually answer these calls, and Claimyr just does the waiting for you. It's similar to those services that help you cancel subscriptions or negotiate bills. They've figured out the optimal times to call and how to navigate the system efficiently. It's basically paying someone else to handle the most frustrating part of the process.
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Dmitry Petrov
I was the one who called BS on Claimyr above, but I have to eat my words. After another frustrating day of trying to get through to the IRS about my self-employment tax questions (with a slightly different situation than OP), I broke down and tried it. It actually worked! I got connected to an IRS representative in about 35 minutes. The agent confirmed what others have said here about the $400 threshold for self-employment tax and helped me understand some deductions I was eligible for as a rideshare driver that I had no idea about. Turns out I was overpaying by calculating my mileage incorrectly. For anyone with self-employment tax questions that need official clarification, it's worth considering if you value your time and sanity.
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StarSurfer
Just wanted to add - make sure you're tracking ALL your business expenses to reduce that self-employment tax! I'm a freelance writer and my first year I missed so many deductions: - Portion of internet and cell phone bills - Home office space (if you have a dedicated area) - Software subscriptions - Computer/equipment depreciation - Professional development (books, courses) - Health insurance premiums (in some cases) These all reduce your net self-employment income, which directly lowers that SE tax. FreeTaxUSA should have a section to enter these expenses.
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Ava Martinez
•Do you need receipts for all of these? I'm terrible at keeping track and just did my first year of freelancing.
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StarSurfer
•Yes, you should keep receipts or digital records for everything. The IRS recommends keeping tax records for at least 3 years after filing, as that's typically how far back they can audit. For recurring expenses like internet or phone, keep your monthly statements that show the total. For one-time purchases, save the receipt (taking a photo works great). For things like home office, you'll want to measure the square footage of your dedicated work space compared to your total home size. Apps like Expensify or even just a Google Sheet can help track everything throughout the year so it's not overwhelming at tax time.
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Miguel Castro
Sorry if this is a dumb question, but how much do you have to make before you need to report self-employment income? I made like $350 doing some graphic design work last year. Do I even need to file?
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Zainab Abdulrahman
•If your self-employment net earnings are less than $400 for the year, you generally don't need to pay self-employment tax. However, you technically should still report the income on your tax return. But realistically, if that's your only income and it's under the standard deduction, you might not be required to file a return at all. The IRS has a tool on their website called "Do I Need to File a Tax Return?" that can give you a definitive answer based on your specific situation.
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Miguel Castro
•Thank you! I'll check out that IRS tool. I do have a regular W-2 job also, so I'll be filing anyway. I was just wondering if I needed to go through all the self-employment forms for such a small amount.
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Ezra Collins
This is exactly the situation I found myself in last year! The $275 self-employment tax is likely correct - it caught me completely off guard too since I was used to W-2 jobs where all that stuff is handled automatically. One thing that really helped me was using Schedule C-EZ (if your business expenses are $5,000 or less) instead of the full Schedule C. It's much simpler and still lets you deduct legitimate business expenses to reduce that net self-employment income. Even small things like software you bought for the freelance work, a portion of your internet bill, or supplies can add up and lower that SE tax. Also keep in mind that you can deduct half of the self-employment tax you pay (so about $137 in your case) as an adjustment to income on your next year's return. It doesn't help this year, but it's something to remember going forward. The whole self-employment tax thing is definitely a learning curve when you're coming from W-2 work!
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Eli Wang
•Thanks for mentioning Schedule C-EZ! I had no idea there was a simpler version. My freelance expenses are definitely under $5,000, so that sounds way less intimidating than the full Schedule C form. Do you know if FreeTaxUSA automatically suggests the C-EZ version, or do I need to specifically look for it? I'm already partway through my return using the regular Schedule C and wondering if I should start over or if it even matters at this point. Also, that's good to know about being able to deduct half the SE tax next year - every little bit helps when you're trying to figure out this whole freelance tax situation!
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