Tax Dues seem too high

[mayanataros]

Hi there, I’m a student who spent all of 2023 as an independent contractor. I did not pay quarterly taxes. When I went to do my tax return in April 2024, it calculated that I owed between $4000-5000. That number does not seem right to me, as I’m a student who was working part time, and only made around $20,000 last year. I am confused on why my taxes would be that high given my status as a student and as a part time low income worker. 

[Jackstar221]

Hi,

Here is an estimated taxes link. Estimated Taxes
Within this link, there is the Tax Withholding Estimator. Tax Withholding Estimator

You can use that link to compare the calculations, they should be similar to the amount owed that was shown in TurboTax, and TurboTax's calculations are very likely to be correct based on what was entered into TurboTax.

You may have received a 1098-T (tuition), or 1098-E (expense) forms from your educational institution which can be entered in the deductions and credits section of TurboTax. I suggest logging in to your school's portal, or asking them if you received those forms.

You may also be able to write expenses off under the self-employment income and expenses section of TurboTax, such as mileage, home office, office supplies, and even the TurboTax fee that you paid in 2023, for the 2022 tax year (you can enter that as an other expense or as a legal & professional fee within the self-employment income & expenses section of TurboTax).

[marctu]

So let's look at your fact pattern for 2023.  Self-employed ("SE") net income of $20K.  The standard deduction in 2023 was $13,850, so your taxable income was somewhat over $6K.  So using that number the income tax was around $600.  

With net SE income of $20K, the SE tax is 15.3% of 92.35% of SE income.  So the SE tax on this is approximately $2,800.  That bring the Federal taxes to around $3,400.  I am assuming the number below also includes state taxes, but I am not sure. 

The question I have is did you do a good job of tracking your expenses for 2023.  SE net income is income less expenses.  Track self-employed expenses year-round with TurboTax Expense Monitor 

I have a recent graduate of college and a daughter in college now.  Being a contractor requires the payment of SE tax, which is the main reason for the tax burden.  I would ask you to carefully go over what your expenses are.  You can amend the 2023 tax returns if you discover that you did not take a supportable level of expenses.

Thank you so much for your question @mayanataros, and best of luck in whatever schooling remains. 

Be well and safe!

Marc T.

Turbo Tax Expert

27 Years of Experience Helping Clients

[VolvoGirl]

Being young and a student doesn't matter.  For SE self employment tax - if you have a net profit (after expenses) of $400 or more you will pay 15.3% SE Tax on 92.35% of your net profit in addition to your regular income tax on it.   If you owe too much on your tax return you will have an underpayment penalty.   Look at your tax return.  Which  lines don't you understand?  Did you enter all your expenses on schedule C?  Are you a dependent on your parents return?  

The Self Employment tax on 20,000 should only be like $2,826 on 1040 line 23.  The underpayment penalty is on line 38.  

[Mike9241]

on net $22.5K (a guess) of self-employment income,  you have about $3200 in self-employment taxes another $600 in income taxes (after the 199A/QBI deduction if you qualify). penalties for failure to pay estimated taxes would add about $200. total about $4000. $5000 would seem unless net SE income was around $27K. these are rough estimates because we can't see your return or know if you're return is missing things that would reduce the taxes