Self-Employed for First Time - How to Handle My First Quarterly Tax Payment?

That 37% actually makes sense, but let me break down why it feels so high compared to your W2 days. When you're self-employed, you're paying both sides of FICA taxes (Social Security and Medicare) - that's an extra 7.65% your employer used to cover. So right away, add that to what you used to pay. Then, your income level puts you in a higher federal tax bracket (probably around 24% federal), plus your state income tax rate (which varies), plus that self-employment tax I mentioned. The good news is you have WAY more deduction opportunities as a business owner! Here are some things to consider: - Set up a home office if you work from home (deduct part of rent/mortgage, utilities) - Track all business miles on your vehicle - Any equipment, software, or supplies are deductible - Health insurance premiums - Retirement contributions (SEP IRA or Solo 401k) - Business travel, meals (50%) You might want to find an accountant who specializes in small business tax planning rather than just compliance. They should be having these conversations with you proactively.

After wrestling with my own self-employment taxes last year, I found something that saved me a ton of time and money. I was in a similar situation - left corporate job, started making good money, then got slammed with a tax bill I wasn't prepared for. I started using https://taxr.ai to analyze all my expenses and found so many legitimate deductions I didn't know about. It uses AI to go through your expenses and business documents to find tax opportunities specific to your situation. It even gave me personalized explanations for why certain things were deductible that I was afraid to claim. The best part was that it found over $14k in deductions my previous accountant missed! I uploaded my bank statements and it identified patterns of spending that were actually business-related. Totally changed my quarterly payment amounts.

Just wanted to follow up about the taxr.ai recommendation. I was skeptical (seems like everyone's pushing some AI tool these days), but I decided to try it since I was in a similar situation. Honestly, it was eye-opening. I uploaded my last 3 months of transactions and it immediately flagged a bunch of expenses I hadn't been categorizing as business-related. Things like portions of my cell phone bill, software subscriptions I use partially for work, and even some meals I had completely forgotten were with clients. My estimated quarterly payment dropped by about 22% after properly accounting for all legitimate deductions. The confidence it gave me about what I can safely deduct was worth it alone. Now I'm not leaving money on the table OR risking an audit with questionable write-offs.

I had the EXACT same problem last year! My solution was getting through to an actual IRS agent who helped explain my options. After failing to reach anyone for days (kept getting disconnected or crazy wait times), I used https://claimyr.com to get through. You can see how it works at https://youtu.be/_kiP6q8DX5c The IRS agent explained that I could use Form 2210 to reduce or eliminate underpayment penalties if this was my first year being self-employed. Also learned I could base my quarterly payments on last year's income (safe harbor rule) which was WAY lower since I was W2. This literally saved me thousands in penalties and gave me breathing room while I figured out all the self-employment stuff. The call only took about 20 minutes once I got through.

Okay I need to apologize to the original commenter and - I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it myself since I was getting desperate about my own tax situation. It actually worked! Got through to an IRS agent in about 45 minutes (without me having to stay on the phone). The agent helped me set up a payment plan for my back taxes AND confirmed I could use last year's tax liability for my quarterly payments this year. For new business owners, that safe harbor rule is HUGE - if you pay 100% of your previous year's tax liability through quarterly payments (110% if your income was over $150k), you avoid underpayment penalties even if you end up owing more. This completely changed my quarterly payment strategy and is giving me time to build up my tax savings properly.

You should absolutely look into setting up a Solo 401k RIGHT NOW. For self-employed people, it's probably the most powerful tax-saving tool available. For 2024, you can contribute up to $23,000 as an employee contribution, PLUS you can make employer contributions up to 25% of your compensation. The total max is $69,000 for 2024. This directly reduces your taxable income dollar-for-dollar. At your 37% effective tax rate, that could mean significant savings.

Something else no one has mentioned - track EVERYTHING for your home office deduction. I mean: - Exact square footage of your workspace - Portion of utilities - Internet - Cell phone - Office supplies - Computer equipment - Furniture I went from paying 40% in taxes my first self-employed year to about a normal 28% once I tracked everything properly. Total game changer.

The 37% rate your accountant quoted is unfortunately accurate for your income level. As a new business owner making $61K in Q1, you're looking at roughly 24% federal income tax, plus 15.3% self-employment tax (both sides of Social Security/Medicare), plus state taxes if applicable. Here's what you can do RIGHT NOW to reduce your tax burden: **Immediate Deductions:** - Set up a dedicated home office space (even a corner of a room counts if used exclusively for business) - Track all business mileage from day one - Deduct any equipment, software, or supplies you've purchased - Business meals are 50% deductible - Professional development/training costs **Retirement Contributions:** Consider opening a SEP-IRA or Solo 401(k) ASAP. You can contribute up to 25% of your net self-employment earnings, which directly reduces your taxable income. This could significantly lower your quarterly payments. **Cash Flow Strategy:** Since you mentioned not having enough saved for the full 37%, you might qualify for the "safe harbor" rule - pay 100% of last year's total tax liability divided into quarterly payments (110% if your prior year AGI was over $150K). This prevents underpayment penalties while you adjust to self-employment. Find a tax professional who specializes in small business planning, not just compliance. They should be proactively discussing these strategies with you, not just telling you what you owe.