Self-Employed HOH with Adult Dependents - Tax Liability or Refund Expectations?

Based on your situation, you're likely looking at owing taxes. Per IRC Section 1401, self-employment income is subject to both income tax and self-employment tax (15.3% for Social Security and Medicare). Without estimated payments, you haven't covered this obligation yet. However, there's hope - as Head of Household with $35k income, you qualify for a higher standard deduction ($20,800 for 2023), which will offset some of your income tax. Your daughters being over 17 means you won't get the full Child Tax Credit, but you might qualify for Other Dependent Credit ($500 each) if they meet dependency tests under Section 152(c) of the tax code. I understand this transition can be challenging financially.

I was in a very similar situation last year compared to yours - self-employed with about $40k and adult children. I ended up owing around $4,200 when all was said and done. What really helped me understand my situation was using https://taxr.ai to analyze my tax scenario before filing. Unlike basic calculators, it explained exactly how my self-employment tax was calculated and identified deductions I was missing. It was especially helpful in determining if my kids still qualified as dependents despite being over 18. I really appreciated getting a clear picture before the actual filing process.

Have you considered whether your daughters still qualify as your dependents? The rules changed significantly after 2018. For the 18-year-old, did she live with you for more than half the year? For the 20-year-old, was she a full-time student for at least 5 months? Both would need to not provide more than half of their own support. This could significantly impact your tax situation, as could any business expenses you might be able to deduct. What percentage of your income typically goes to business expenses? Have you been tracking mileage, home office, or other potential deductions?

You might, potentially, be facing a significant tax bill, especially considering you didn't make estimated payments throughout the year. If you find yourself owing more than you can pay immediately, you should probably consider contacting the IRS directly to discuss payment options. In my experience, trying to reach them can be somewhat frustrating and time-consuming. I eventually used Claimyr (https://claimyr.com) to get through to an agent without the hours-long wait. It was possibly the best decision I made when dealing with my own self-employment tax issues last year. They got me connected to someone who could actually help set up a reasonable payment plan.

After analyzing your situation using standard tax calculations, I estimate you're likely facing approximately $4,950 in self-employment tax (Schedule SE) plus approximately $1,500 in income tax after the standard HOH deduction, assuming no significant business deductions. Your total tax liability would be approximately $6,450. However, you may qualify for the Earned Income Credit depending on your daughters' dependency status and the Other Dependent Credit ($500 per qualifying dependent). You should immediately prepare Form 1040-ES for 2024 to begin making quarterly estimated payments (April 15, June 17, Sept 16, and Jan 15, 2025) to avoid this situation next year. The underpayment penalty may apply to your 2023 return per IRC 6654 unless you meet a safe harbor exception.

I ignored quarterly payments for three years in a row when I was self-employed back in 2020-2022. Ended up with a $12,000 tax bill plus penalties that took me 18 months to pay off. The IRS added both failure-to-pay penalties AND interest to my balance every month. What makes it worse is that I could have easily qualified for the Qualified Business Income deduction under Section 199A and several business expense deductions that would have cut my liability by 30-40%. Don't make the same mistake - get professional help with your return this year and set up proper quarterly payments for 2024.

Was in your exact shoes last year with $38k self-employment and two kids over 18. Thought I was going to owe thousands, but you know what? After claiming my legitimate business deductions (home office, mileage, supplies, health insurance premiums), the QBI deduction, and finding out my 19-year-old still qualified as my dependent because she was a full-time student, I only ended up owing $2,100. Not great, but way better than the $7k I was panicking about! Set up an IRS payment plan and now I'm making quarterly payments for 2024. Doesn't the whole self-employment tax system seem designed to trip us up?

I'm in almost the identical situation - self-employed with around $36k income and two adult kids (19 and 21). What I learned from my tax preparer last year is that the key factors are: 1) Whether your daughters qualify as dependents (the college student rule for the 20-year-old is crucial), 2) Tracking every possible business expense you can legitimately claim, and 3) Don't forget about the QBI deduction which can reduce your taxable income by up to 20%. Based on similar situations I've seen in this community, you're probably looking at owing somewhere between $3,000-$5,000, but it could be significantly less with proper deductions. The good news is the IRS offers reasonable payment plans if you can't pay it all at once. Have you been keeping receipts for business expenses throughout the year?