That tax shock is definitely real! I remember being so confused my first year out of college too. One thing that helped me was setting up a simple spreadsheet to track my paystubs and see exactly where my money was going each pay period. Since you mentioned student loans, make sure you're taking advantage of that student loan interest deduction when you file your taxes next year - it can save you a decent amount. Also, if your employer offers a 401k with any kind of match, definitely look into that. Not only does it reduce your current taxable income (which means less taxes withheld), but you're also getting free money from your employer. The withholding does seem high, but California really does hit you hard with state taxes. I'd recommend using the IRS withholding calculator others mentioned to double-check, but don't be surprised if it's actually pretty close to correct. Better to have a little too much taken out than to owe a big chunk in April!

The 31% withholding rate you're seeing is unfortunately pretty typical for California, especially for new graduates. I went through the exact same shock when I started my first job here! A few things that might help: - Double-check that you filled out your W-4 correctly. The new form (post-2020) can be confusing, and many people accidentally have too much withheld - California's SDI (State Disability Insurance) is currently 0.9% of your wages, which is unique to CA - Your effective tax rate when you actually file will likely be lower than 31% due to standard deduction and other factors Since you mentioned student loans, definitely keep track of the interest you pay - that deduction alone could save you several hundred dollars when you file. Also, if your company offers a 401k with matching, contributing even a small amount will reduce your taxable income and lower your withholding. The good news is that if you're having too much withheld, you'll get it back as a refund next spring. But it's worth running the numbers through the IRS withholding calculator to see if you can adjust and get more in your paychecks now.

Can someone explain the QBI calculation in simple terms? If I made $48,000 from contract work and had $13,000 in business expenses, how much QBI deduction would I get? Still trying to wrap my head around this.

Just wanted to add another important point about QBI - make sure you understand the difference between business income and investment income. Only your actual business profits count toward QBI, not things like interest, dividends, or capital gains from investments. Also, if you're married filing jointly, your spouse's income counts toward that threshold calculation even if they don't have any business income. So if your spouse has a high W-2 salary, you might hit those income limits faster than you'd expect. It's worth running the numbers both ways to see how filing status affects your QBI deduction. One last tip: if you're close to those income thresholds, consider timing some business expenses or income to stay below the limits if possible. The difference between getting the full 20% deduction versus having it phase out can be substantial!

Just to add my experience - I was in the EXACT same situation during college. Had work study all 4 years and didn't file until senior year when I got a proper internship. I talked to an accountant years later who said since I was owed refunds (not that I owed any tax), there was no penalty for filing late. Apparently the IRS doesn't penalize you for filing late if THEY owe YOU money! I ended up filing the old returns and got small refunds for each year. The whole process was pretty easy. If I were you, I'd file those old returns just to get closure and the small refunds you're probably entitled to.

Don't stress too much about this! You're definitely not alone - so many college students go through this exact same confusion about work study income and filing requirements. From what you've described, you were likely not required to file for those years since your earnings were well below the filing thresholds. Work study income is treated like regular W-2 wages, so the standard filing requirements apply. However, since you had federal taxes withheld (even those small amounts of $11 and $9), you were actually entitled to get that money back as a refund! The IRS doesn't charge penalties for filing late when they owe YOU money, but there is a time limit to claim refunds - generally 3 years from the original due date. For 2021, you'd have until April 2025 to file and claim that $11 refund, and for 2022, until April 2026 for the $9. It's not a huge amount, but it's money that's rightfully yours, and filing those returns would give you peace of mind. Also, don't forget to check your state filing requirements! Some states have much lower thresholds than federal, so you might need to file state returns even if federal wasn't required. You're being very responsible by looking into this now - better late than never!

Something I haven't seen mentioned yet that's worth considering: the vehicle needs to be titled and registered in your business name (or at least have clear business ownership documentation) to maximize your Section 179 protection during an audit. I learned this the hard way when a client bought a truck on December 30th but titled it in his personal name with the intention of transferring it to his LLC later. The IRS challenged the business use during audit because the title didn't reflect business ownership at the time of purchase. We eventually resolved it, but it created unnecessary complications and legal fees. If you're buying through a business entity, make sure all the paperwork - title, registration, insurance - clearly shows business ownership from day one. If you're a sole proprietor using your personal name, keep very detailed records showing the vehicle is used exclusively or primarily for business. Also, consider the optics: a business vehicle purchased on December 31st that's titled personally and parked at your residence every night is going to raise more red flags than one that's clearly part of a legitimate business operation.

I've been following this thread closely as someone considering the same December 31st vehicle purchase strategy. One aspect I haven't seen discussed is the potential interaction between Section 179 and state tax laws - some states don't conform to federal Section 179 rules or have different limitations. For example, in my state (California), there are additional restrictions on Section 179 deductions that could affect the overall tax benefit calculation. If you're planning a large vehicle purchase for Section 179 purposes, make sure to check how your state handles these deductions. You might find that while you get the federal benefit, your state tax savings are different than expected. Also, for those mentioning the audit risk - it's worth noting that the IRS has been using data analytics to identify patterns in Section 179 claims. Multiple large asset purchases in December, especially by the same taxpayer across multiple years, can trigger algorithmic flags even before human review. Sometimes spreading major purchases across tax years, even if it means less immediate tax benefit, can be the smarter long-term strategy. Has anyone dealt with state conformity issues on Section 179 vehicle deductions?

If you're comfortable with spreadsheets, you can actually build a simple tax calculator using the bracket method that Raúl explained. I created one for myself last year and it's been super helpful for quarterly planning. Here's the basic formula structure: - Set up columns for each tax bracket (income ranges and rates) - Use IF statements to calculate how much income falls in each bracket - Multiply each bracket amount by its corresponding rate - Sum all the bracket calculations for your total tax The key insight is that those tax table worksheets are just doing this math for you automatically. Once you understand that it's just applying the progressive brackets step by step, the whole system becomes much clearer. I can share the spreadsheet template if anyone's interested - it handles the 2025 brackets and automatically updates when you change your projected income. Much more transparent than trying to decode those printed tax tables!

I've been dealing with this exact same issue! As someone who switched from W-2 to freelance work this year, projecting my 2025 taxes has been a nightmare. Those tax table worksheets are so confusing - I kept staring at all those income ranges and corresponding amounts wondering how they even calculated those numbers. What really helped me was understanding that the tax tables are essentially just pre-calculated versions of the progressive bracket system. Instead of making everyone do the math themselves (like the example Raúl gave with the $78k income), the IRS just does all those calculations and puts them in a big table. The breakthrough for me was realizing I could just use the bracket formulas directly instead of trying to interpolate from the printed tables. Much more accurate for planning purposes, especially when your projected income might fall right between the ranges shown in the worksheets. One thing to watch out for - make sure you're using the right filing status brackets. I initially used the wrong ones and was off by quite a bit in my estimates!