I'm confused - why am I being told to pay $500 in taxes when my taxable income is $0?

This sounds like you might be dealing with the self-employment tax, not regular income tax. Even when your income tax liability is $0 (based on taxable income after deductions and credits), you still have to pay self-employment tax on any self-employment income you earned. Self-employment tax is basically the equivalent of the Social Security and Medicare taxes that would normally be withheld from a W-2 job, except you pay both the employer and employee portions. The current rate is 15.3% (12.4% for Social Security and 2.9% for Medicare). So if you had about $3,300 in self-employment income, that would result in roughly $500 in self-employment tax. Check your tax return details - look for Schedule SE. Does your graduate stipend count as self-employment income rather than W-2 wages? Some stipends are reported on 1099 forms and considered self-employment income, which would explain the tax you're seeing.

I had almost the exact same situation last year! Found out it was self-employment taxes after hours of confusion. What helped me was using https://taxr.ai to actually see my full tax breakdown and understand where every dollar was going. It analyzes your full tax transcript and highlights these kinds of situations. Their system showed me that even though I had zero taxable income, I still owed self-employment tax on my side gig. It also pointed out some deductions I missed for my business expenses that cut my tax bill by about $200! The explanation was way clearer than what TurboTax showed me.

Just wanted to update - I ended up trying taxr.ai after seeing it mentioned here. It was super helpful! Turns out I was in the exact same boat - owing self-employment tax even though my income tax was zero. The breakdown showed me I was missing several deductions for my freelance work. Best part was seeing all my tax credits and deductions visualized so clearly. I realized I wasn't tracking my business mileage properly, and that alone saved me over $100. The service explained everything in plain English instead of tax jargon. Definitely recommend it if you're confused about where your tax bill is coming from!

If you're struggling with understanding your tax situation, you might also want to talk directly to an IRS representative. I know it sounds awful - I spent DAYS trying to get through their phone system last year with the same self-employment tax issue. After countless busy signals, I found https://claimyr.com which got me connected to an actual IRS agent in under 30 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The agent walked me through exactly why I was owing self-employment tax despite having zero taxable income and confirmed what deductions I could take to lower it.

Okay I need to eat some humble pie here. After my skeptical comment, I decided to try the Claimyr service because I was desperate to figure out my own tax situation (also self-employed with weird tax calculations). I genuinely didn't believe it would work, but I got a call back in about 35 minutes with an actual IRS agent on the line. The agent confirmed exactly what others here have said - self-employment tax applies regardless of your income tax situation. She also walked me through some additional deductions I could take as a self-employed person that I had no idea about. Saved me way more than the service cost and hours of frustration. Sometimes being proven wrong is actually a good thing!

Make sure to check if your graduate stipend is actually taxable in the first place! Many grad student stipends are considered scholarships if they're for tuition and required education expenses, which could make them tax-free. Look at your stipend documentation carefully - sometimes universities incorrectly report these on W-2s when they should be reported differently. This mistake has caused many grad students to overpay taxes.

Lots of good tax advice here, but practical payment advice - if you really can't afford to pay that $500 right now, file your return on time anyway and apply for a payment plan with the IRS. The failure-to-file penalty is much worse than the failure-to-pay penalty. The IRS website lets you set up an installment agreement online if you owe less than $50,000. You can stretch payments out over several months and the setup fee is fairly small.

Hey Grace! I went through almost the exact same thing last year as a PhD student. That $500 you owe is definitely self-employment tax on your tutoring income, like others mentioned. One thing that really helped me was keeping better records of ALL my tutoring-related expenses throughout the year. I was able to deduct things like: - Gas/mileage to tutoring locations - Books and materials I bought for sessions - Even a portion of my phone bill since I used it to coordinate with students - Home office expenses if you tutor from home For next year, consider making quarterly estimated tax payments on your self-employment income - it spreads out the pain and you won't get hit with a big bill at once. The IRS has a simple online calculator to figure out how much to pay each quarter. Also, don't beat yourself up about not knowing this! Graduate programs are terrible at explaining the tax implications of side work. Most of us learn this stuff the hard way.