I fucked up my taxes

Taxes suck.

I spent $400 to get them filed on my behalf and it still felt like a lot of work. Many European countries simply send citizens their tax bill. SHOCKING IDEA.

In the U.S. we have to play a complex game in which the IRS knows what you owe but makes you get there. If you fail the game, you could get fined or incarcerated.

Super fun game.

Regardless, I hate the complexity of the American tax system

Same.

Your time is worth more than you dealing with the "intricacies" of the IRS.

If you had spent half that time with a client, you could have more than paid someone to do your books and all of a sudden, you're net positive as it relates to the most important ledger of life - time.

nearly 5-figure tax bill

Trust me, it feels like -- pardon my French -- being sodomized paying that much to Uncle Sam.

But maybe you can make it easier on yourself by making estimated payments at the end of every quarter, so you won't be hit with one gigantic bill at the end of the year.

Taxes always suck.

In essence it should be pretty simple but somehow it has become super complex.

I’ve written a tool a while back to grab all the invoices from my Gmail account by quarter. That helps gathering invoices from some subscriptions I always forget.

But he best “hack” is to simply pay an accountant to do the work for you. It might cost you a bit but in the end they earn it back for you.

I also do the company tax filings quarterly so you have a sanity check every 3 months. This should give you a pretty good idea of what your income tax is going to be over the year. No surprises.

Don't touch 50% of your revenue. Don't be naive... It'll never be yours.

Another point of view: Taxes and Accounting is much easier than proper software developement.

It has gotten increasingly complex after it was 'simplified' several presidents ago.

As much as others may think, the IRS isn't psychic. They don't really know what you should be paying, because they don't know what your legitimate deductions are. You are supposed to be tracking those. A lot of states also really don't pay that much attention either. In my state, it is well known that unless the amount you owe is over a certain amount, you'll never get investigated.

I also dislike the complexity, but I also have an innate disagreement with the notion that there is this huge, silent partner that expects to be paid up front (and often in advance), or expects that some expenses should be amortized.

Taxes are so frustrating and I agree, it seems way more complex than it needs to be.

I've heard horror stories about back taxes and it really makes me nervous so I keep track of everything. I've also worked with the same accountant for years, finding a good accountant is worth its weight in gold. I know exactly what he expects, keep track of everything and ensure I have a paper trail for all expenses and revenue. We have a spreadsheet that we update through out the year, with everything needed. It also has all of the summaries needed for end of year taxes.

During tax season I spend a solid day double checking everything and ensure I have everything I need. I also over save, saving like 40% of all money made for taxes (this is extreme but it gives me a piece of mind). I pay quarterly taxes and still try to keep a little cushion of money aside as I know I'm going to have to pay more when the year ends. In my mind, the most important bill to pay is the tax bill.

After doing this for years it's become part of my workflow and I feel a lot less stressed out about taxes when April comes around. I also try and pay everything as early as possible so it's done. I usually have everything squared away in January and have filed by the end of February.

I'm only now paying off taxes from consulting work I did in 2017. I hired an accountant to handle this for me two years ago, which he claimed he did, only for me to then continue receiving late fee notices from the IRS. It was all I could do to get refunded by the accountant.

So it's not just you. In fact, I just finished reading a book by an author I really respect, and even he devoted a passage to the headache of the American tax system:

I went seven or eight years without filing a tax return, not out of a determination to avoid taxes, but simply due to the soul-crushing paralysis that would come over me at the thought of facing an impenetrable morass of tax instructions, and my own negligence in keeping records. Worried about going to jail, I eventually faced the music and, through a colossal effort, set things right with the IRS.

Regardless, I hate the complexity of the American tax system. It feels like it's intentionally complicated so that the industry can profit off the taxpayer.

This is objectively true, by the way. Granted, taxes are always going to be a little more complicated to stay on top of if you're self-employed, but Intuit and the rest of the industry have spent decades lobbying the federal government to keep tax filing in the US unnecessarily labor-intensive and confusing.

https://www.propublica.org/article/how-the-maker-of-turbotax-fought-free-simple-tax-filing

If you are complaining about taxes in USA, try comming to Spain... 😅😅

My strat, after reading about freelance taxes:

Take your monthly freelance income, put 30% aside.
Every 3 months pay the 30% you saved from each month as a quarterly tax.

End of the year pay $80 for turbo tax freelancer and file ur taxes. Take deductions, play smart.

Problem solved.

P.s. even easier if you use quickbooks.

Unfortunately, if you don't research freelancing taxing before freelancing, there's only one solution: do better next year by learning from ur mistakes!

What’s funny about the IRS is they recently asked me to pay back taxes from 3’years ago for a total of $150 dollars. It seemed bizarre, to be asking for such a minor amount of money years later. I wonder if they are just years behind on analyzing taxes or if they were screwing with me…

Keeping track of filing deadlines can be a headache if you have nexus in multiple states and jurisdictions. Be warned: auditors see filing late as a red flag. If you miss a filing deadline, you’ll have to file eventually, and you still could face penalties or fines.

To avoid this costly mistake, create a filing schedule and review it regularly to track any tax changes in the different jurisdictions and act accordingly!

In the US, I pay for an accountant to handle my taxes and teach me what they did after they do it. I pay 200-300 dollars. I have too much stuff and I can't keep track of what to do, I'm not from this country but I've learned how to sell and buy real estate, business stuff, stocks etc but no clue how to report it all in the taxes. I do however keep track of all the documents, organize it, and then give it to my guy.

The amount of stress that has been reduced has been crazy. I'm not so bothered by taxes every year and I get to have an awesome weekend. Worth the investment for a peace of mind.

The IRS did contact me once about a mistake last year and fixed it for me.

Yes it is atrocious. This is the first year I've been using YNAB and it has been a game changer for me. I was always extremely organized with my business finances but personal finances I never tracked terribly closely. This was my first year as a contractor and while I enjoy the flexibility, the tax liability bit me. Lesson learned.

I started my business last year. Got caught in between contracts and dipped into the tax reserves. Owed about $10k afterwards.
Paul Ryan passed massive tax cuts for the rich claiming a citizen could do their taxes on a postcard. It turns out that the opposite was true.

I’m in the same boat, still have to get the tax bill though but I know its not going to be good. One thing I wish I knew a lot more of but this is how we learn.

After you get into the swing of things, it does get better.

U.S.: Near each quarter you should be paying estimated tax to Fed and State. Then you won't be surprised with a huge bill at tax time.

It also helps to have a separate business bank account that you connect with software like QuickBooks. Then every income/expense transaction is automatically pulled into QB, where you categorize it (software, phone, health insurance, professional services, etc...) At first you have to manually mark it all, but overtime it can automate recurring transactions.

Last part is hiring an accountant for yearly filing, which takes the stress out. I overpay ($450) but again the peace of mind is worth it.

My first year I also hired a someone to look at my books in prep for my taxes. I didn't need them, but they answered a lot of my questions.

At least in US you can start do business right away and figure out taxes later. In Romania, you need to register to sell products ( online included ), get a ltd or a variant of sole proprietorship, buy a lot of mandatory registers, get an accountant, go to several institutions to let them know that you want to do business, get authorized by the mayor or the city where the business is opened. Then you have to employ yourself, and another round of visits to different institutions, to a legal medical clinic to prove that you are able to work. They are nonsense, but if you are not doing all those useless things, you can get very big fines.

Even if you want to sell the products as a person, you still have to register, and prove that you have at least a bachelor degree or previous work experience in the field. An accountant is not required, but you will have to report income and expenses similar to the US tax system, with a yearly tax declaration, and you are required to keep all the documents that prove the income and the expenses.

I had the same issue.

You are not the alone one

https://www.indiehackers.com/post/the-hard-truth-i-learnt-about-bootstrapping-in-2021-169be880e9

While the US tax system is overly complex - no doubt - because of the system of deductions - I disagree that "Many European countries simply send citizens their tax bill. SHOCKING IDEA" is a good idea. Because the govt makes mistakes..often! It doesn't have a complete financial picture of every person (there are ~200+ million adults in US). And if the government SENDS you a tax bill that is wrong - you would have to fight it anyway.

Via: https://tolltrackingweb.com/