Self-employed earning $78k, TurboTax says I owe $15k in taxes... is this normal??

So I've been freelancing full time for the past year as a graphic designer, and I pulled in about $78k total. Just did my taxes using TurboTax and nearly fell out of my chair when it said I owe approximately $15k in federal and state taxes! I haven't paid any quarterly estimated taxes, social security, or anything throughout the year (first time being self-employed, total rookie mistake). This seems like an insane amount to owe! That's like 20% of my income going straight to taxes. Is this actually right for self-employment? I thought maybe TurboTax made an error or I entered something wrong. Anyone else in a similar boat or know if this tax bill sounds about right for self-employment income? Freaking out a little!

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20 comments

Zainab Abdulrahman

•8M

That's actually about right for self-employment taxes. When you're self-employed, you're responsible for both portions of Social Security and Medicare taxes (the employee AND employer portions), which comes to about 15.3% of your net profit. This is on top of your regular income tax. A quick breakdown: On $78k of self-employment income, you'll pay roughly 15.3% in self-employment tax (around $11,900) plus your regular income tax. You do get to deduct half of your self-employment tax from your income, which helps a bit. But yes, when you combine federal, state, and self-employment taxes without any quarterly payments, $15k sounds in the ballpark.

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Zainab Abdulrahman

•8M

Yes, when you're an employee, your employer pays half of your Social Security and Medicare taxes (7.65%) and you pay the other half through withholding. When self-employed, you're both the employer and employee, so you pay the full 15.3%. It's not unfair - just a different structure. Forming an LLC doesn't change anything tax-wise unless you elect S-Corp status. With an S-Corp, you pay yourself a "reasonable salary" subject to employment taxes, and take the rest as distributions not subject to self-employment tax. But this requires more paperwork and has its own costs.

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Yara Elias

•8M

I was in a similar situation last year and wish I'd known about taxr.ai before I spent hours trying to figure out my self-employment taxes. I found https://taxr.ai when I was desperately searching for help understanding what deductions I could claim to reduce my tax bill. The website analyzed my income and expense documents and found several deductions I had missed when using TurboTax on my own. The tool specifically highlighted business expenses I hadn't thought to include, like a portion of my internet bill, some software subscriptions, and even part of my rent since I use a home office. It ended up saving me around $3k in taxes!

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Yara Elias

•8M

It works with any tax software because it analyzes your documents and situations, not the software itself. You can take the deductions it finds and enter them into whatever tax program you prefer using. The difference is that TurboTax asks general questions, but taxr.ai specifically looks at your profession and spending patterns. It found that as a web designer, certain subscriptions I was using were fully deductible, but TurboTax had categorized them as personal expenses because of how I answered their questions. It's not about claiming things you shouldn't - it's about properly categorizing legitimate business expenses.

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QuantumQuasar

•8M

Just wanted to update that I checked out taxr.ai and it was actually really helpful! I uploaded my bank statements and it automatically tagged a bunch of expenses as potential business deductions that I never would have thought of. It flagged my Adobe subscription, professional organization dues, and even some client meals I'd forgotten about. My taxes went from owing about $11k to around $8500. Still hurts but WAY better. Definitely recommending to my other freelancer friends. Really wish I'd known about this before I spent 3 years overpaying!

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Paolo Moretti

•8M

I had the exact same freak-out last year with a similar amount owed. After trying for weeks to get through to the IRS to set up a payment plan (kept getting disconnected), I found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c. They got me connected to an actual IRS agent in about 20 minutes when I'd been trying for days on my own. The agent helped me set up a payment plan for my taxes so I didn't have to pay it all at once. Instead of panicking about coming up with $14k immediately, I'm making monthly payments that I can actually handle. Plus, I learned about making quarterly estimated payments for this year so I don't end up in the same situation again.

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Paolo Moretti

•8M

They use an automated system that navigates the IRS phone tree and waits on hold for you. When an actual agent picks up, you get a call connecting you directly to that person. It's not a special hotline - they're just handling the frustrating part of waiting on hold. I tried calling myself for three days straight and kept getting disconnected after 1-2 hours of waiting. With their service, I got connected in about 20 minutes while I was working on other things. For me, it was worth it because I needed to get on a payment plan before the deadline to avoid additional penalties.

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Keisha Jackson

•8M

Ok I need to eat some crow here. After my skeptical comments I decided to try Claimyr because I've been trying to reach the IRS about an issue with my self-employment taxes for WEEKS with no success. I was absolutely shocked when they actually got me through to a real person in about 25 minutes. The IRS agent was able to help me set up an installment plan for my self-employment taxes, and even helped me understand how to properly calculate my quarterly payments going forward. I'm still paying a chunk, but now it's spread out in a way I can manage. Honestly wish I hadn't wasted all those hours getting disconnected trying to do it myself.

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Oliver Weber

•8M

Don't forget about business deductions! I'm self-employed too and my first year I got hammered with taxes. Now I track EVERYTHING - mileage, home office, supplies, software, professional development, health insurance, etc. It can significantly reduce your taxable income. Also, start paying quarterly estimated taxes ASAP. Set aside 25-30% of every payment you receive into a separate savings account specifically for taxes. It makes a huge difference when tax time comes around again.

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Oliver Weber

•8M

I personally use the simplified method because it's straightforward - just $5 per square foot up to 300 square feet. It might not save as much as the regular method, but it's way less hassle and doesn't require keeping records of all your home expenses. The regular method can save more money if you have a large dedicated space, but you need to track everything - utilities, rent/mortgage, insurance, repairs, etc. It's not automatically an audit flag if you legitimately use the space exclusively for business, but the documentation requirements are much higher. For most people, the simplified method is the better balance of tax savings vs. paperwork.

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Natasha Romanova

•8M

This tax bill definitely seems within the normal range for self-employment. Like others said, you're paying both halves of Social Security and Medicare (15.3%) plus regular income tax. But I wanted to add - you should also be setting up quarterly estimated tax payments for this year to avoid penalties next year! The IRS expects you to pay as you earn throughout the year. If you wait until tax time next year, you'll likely get hit with underpayment penalties on top of your tax bill. You can set this up through the IRS Direct Pay system online. Generally, you should be setting aside 25-30% of your income throughout the year for taxes.

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Natasha Romanova

•8M

Quarterly estimated tax payments are typically due on April 15, June 15, September 15, and January 15 of the following year. These dates shift slightly if they fall on weekends or holidays. For calculating what to pay, you have two main options: You can pay 100% of your previous year's tax liability divided into four equal payments (110% if your income is over $150,000), or you can estimate your current year's tax and pay as you go. Most new freelancers find it easiest to set aside about 30% of each payment they receive, then calculate more precisely when making the quarterly payments. The IRS Form 1040-ES has worksheets to help you calculate this, or you can use tax software that offers estimated payment calculators.

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Javier Gomez

•8M

Same thing happened to me last year. Made $81k freelancing and owed about $16k. Self-employment taxes are brutal! You should 100% open a SEP IRA or Solo 401k to reduce your taxable income. You can contribute way more than a regular IRA - like up to 25% of your net earnings or around $61k for 2023 (whichever is less). I put $15k into my Solo 401k last year and it saved me about $3300 in taxes. Plus you're saving for retirement! Also look into the Qualified Business Income deduction - you might qualify for a 20% deduction on your business income.

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