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Malik Jackson

I'm staring at a blended tax rate of 54.1% on my return... is this even possible??

Just ran my numbers through TurboTax and I'm looking at a blended tax rate of 54.1%. How the heck is this possible?? I earned about $93,000 this year with a mix of W-2 income and some freelance work. I thought the highest federal tax bracket was like 37% and I'm nowhere near that income level. State tax in California is high but not THAT high. I'm seriously freaking out right now because I was expecting a refund but it's showing I owe an additional $7,800. This can't be right, can it? I paid quarterly estimated taxes on my freelance income and had extra withholding from my W-2 job specifically to avoid owing anything. Has anyone else had TurboTax show some crazy high blended rate? Did I mess something up in my entries? Or am I just completely misunderstanding what a "blended tax rate" actually means?

The 54.1% blended rate definitely sounds like an error. The blended rate represents your total tax divided by your total income, and even in high-tax states like California, it shouldn't be anywhere near that percentage at your income level. A few things to check: First, make sure you didn't accidentally enter your income twice somewhere. Second, verify that your self-employment tax is calculating correctly - you should only be paying SE tax on your freelance income, not your W-2 income. Third, check if you accidentally entered a penalty or additional tax somewhere. For someone making $93K with mixed income in California, your federal rate should be in the 22-24% bracket, plus about 9-10% for California, plus self-employment tax on your freelance portion (15.3% but only on that portion). All in, your blended rate should probably be somewhere around 30-35% maximum.

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StarSurfer

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If they accidentally entered their quarterly estimated payments as additional income instead of payments, could that cause this issue? I did that once and it totally messed up my calculations!

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That's an excellent point! If quarterly estimated payments were entered as additional income instead of as payments already made, that would absolutely cause this issue. The software would think you earned significantly more than you actually did. This is a really common mistake with mixed income. When you enter your quarterly payments, make sure you're entering them in the "Payments Already Made" or "Estimated Tax Payments" section, not as additional business income or miscellaneous income.

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Ravi Malhotra

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I ran into a similar nightmare scenario last year when I was trying to figure out my taxes with mixed income. After hours of frustration, I used taxr.ai (https://taxr.ai) and it completely changed the game for me. I uploaded my tax documents and it immediately flagged that I had double-entered some income and miscategorized my estimated tax payments. The tool does a line-by-line analysis and identified exactly where my errors were. It saved me from paying almost $6k in taxes I didn't actually owe! Based on what you're describing, it sounds like you might have a similar data entry issue that's causing this abnormal tax rate.

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How exactly does this work? Does it actually fix the errors for you or just point them out? I'm curious because I'm also doing mixed W-2 and freelance and I'm terrified of making mistakes.

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Omar Hassan

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I'm a bit skeptical. Couldn't you just double-check your entries manually? I mean, these tax prep programs already have error checking built in. What does this do that's different?

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Ravi Malhotra

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It doesn't automatically fix the errors for you - it identifies them and explains what's wrong so you can correct them yourself. It's like having a tax professional review your return but much faster and more affordable. It specifically checks for things like double-counted income, misclassified payments, and missed deductions. What makes it different from the built-in error checking in tax software is that it actually compares all your documents against each other and looks for inconsistencies between forms. Tax software only checks for obvious math errors or missing fields, but can't tell if you entered the same income in two different places or categorized something incorrectly.

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Omar Hassan

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Ok I have to eat my words about being skeptical of taxr.ai. I decided to try it since my situation is similar to the OP's with mixed income, and it immediately found that I had accidentally entered my 1099-NEC income TWICE - once in the self-employment section and again in the miscellaneous income section. Fixed that and my tax bill dropped by over $4,000! The analysis also showed I'd missed some home office deductions I was eligible for. The whole process took about 10 minutes and saved me thousands. Definitely worth checking out if you're seeing weird numbers like a 54.1% tax rate!

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If you need to talk to someone at the IRS about this (which might be a good idea given how unusual that rate is), I'd recommend using https://claimyr.com. I tried calling the IRS directly about a similar issue last year and spent DAYS trying to get through. Then I found this service through a YouTube video (https://youtu.be/_kiP6q8DX5c) and they got me connected to an IRS agent in under 45 minutes. The agent was able to look at my previous returns and confirm I had made a major error with how I was reporting my estimated tax payments - I was essentially double-counting my income because of how I entered my quarterly payments. Sounds like you might be having a similar issue.

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Diego Chavez

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Wait, how does this actually work? They can just get you through to the IRS faster? I thought everyone had to wait in the same queue?

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Omar Hassan

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This sounds too good to be true. The IRS wait times are legendary. I've spent literally 3+ hours on hold before giving up. You're telling me this service can just bypass all that?

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They use an automated system that continually calls the IRS and navigates the initial phone tree for you. When they finally get through to where you'd normally wait on hold, they call you so you can take over the call. You don't have to sit there listening to hold music for hours. No, it doesn't let you cut in line or anything shady - you still wait your turn, but the system does the waiting for you instead of you having to sit by your phone for hours. The IRS doesn't give them special treatment; they've just figured out how to automate the painful part of the process.

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Omar Hassan

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Alright, I was wrong AGAIN. After I fixed my tax return problems using taxr.ai, I still had questions about how to properly report my estimated payments going forward, so I decided to try Claimyr to talk to the IRS directly. I've literally never been able to get through to a human at the IRS before. With Claimyr, I got a call back in about an hour telling me they had an IRS agent on the line. The agent walked me through exactly how to properly document my quarterly estimated payments so they don't get confused with income. Total game changer. For anyone facing a weird blended tax rate like OP, definitely get your return checked and then talk to the IRS directly to make sure you understand how to properly report everything.

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NeonNebula

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Another thing to check - make sure you're not somehow getting hit with the Additional Medicare Tax. That kicks in for singles at $200K income, but if you accidentally entered something wrong, the system might think you're subject to it. That's an extra 0.9% on earnings above the threshold. Also, check if you're getting hit with any underpayment penalties for your quarterly estimated taxes. If the system thinks you didn't pay enough during the year, it can add penalties and interest.

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Malik Jackson

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I just spent the last hour going through everything line by line and I found the issue! Somehow I had entered my quarterly estimated payments of $12,000 as "Additional income" rather than "Payments already made." So the system thought I had earned $105,000 AND hadn't paid any estimated taxes, which is why it was calculating such a high effective rate and saying I owed so much more. I fixed the entry and now my blended rate is showing as 31.4% and I'm getting a refund of $1,200. That makes WAY more sense. Thanks everyone for the help!

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Just a general tip for anyone with W-2 and self-employment income: always use the IRS tax withholding calculator at the beginning of the year to figure out proper withholding. I do about 70/30 W-2 and freelance and had a similar shock a few years ago. Now I adjust my W-2 withholding to account for self-employment taxes and make sure my quarterly payments are at least 100% of last year's tax liability to avoid penalties.

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Sean Kelly

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The withholding calculator is great but I found it super confusing with mixed income. Do you enter your anticipated freelance income somewhere specific? Or just add it to your total expected income?

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You add your expected freelance income to the section that asks about "other income" not subject to withholding. Then it calculates both your income tax on that amount plus factors in the self-employment tax. The key is updating it a few times throughout the year as your freelance income might fluctuate. I usually do it quarterly right before making estimated payments to make sure everything still looks on track.

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