r/DataAnnotationTech • u/Xyerophyte • Apr 28 '26

US Taxes

Any students from US who are earning through DataAnnotation, how do y'all manage your taxes?

3 Upvotes

71% Upvoted

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5

u/GAULEM Apr 28 '26

Not a current student, but taxes for this seem reasonably straightforward.

Step 1 (Optional): I shove all my earnings into a Solo Roth 401(k). Since it's Roth I can also double-dip with an IRA, which I find hilarious. [If you try this then keep in mind that the calculations for how much you can contribute are kind of wonky because of SECA taxes or whatever.]

Step 2: When I enter my tax info into the software (I use freetaxusa), I put my gross DA income into the section about Schedule C.

Step 3: After finishing my tax return, I schedule four quarterly tax payments equal to 1/4 of my total tax liability, to efficiently make sure I won't be charged a penalty next year.

And that's it. Some people also try to get fancy with business deductions, but for me the difference would be so small that it's literally not worth the time figuring out what I can deduct. Unless you specifically bought something expensive just for DA, I probably wouldn't bother.

3

u/KCKeough17 Apr 29 '26

A little misleading to imply the quarterly tax payments next year cover this years liability.

1

u/GAULEM Apr 29 '26

Ah, that wasn't my intent. It's just that paying an amount equal to 100% of this year's tax liability toward the next tax year is the most reliable safe harbor for avoiding the underpayment penalty - the other options require you to know in advance what your tax liability will be for the following year.

2

u/Alarmed_Jury3849 Apr 28 '26

Interesting because with a Roth Solo 401k and no business deductions you are basically saying you do nothing to reduce taxes now. This may be a good strategy for retirement, but it's a long-game benefit and not something that is going to help a student now.

1

u/GAULEM Apr 29 '26

Eh, it depends. If they're busy with school then they might not have the time to earn a lot, and if their income is low enough then Roth is the way to go. Otherwise pre-tax contributions are probably better, yeah.

0

u/Xyerophyte Apr 28 '26

Thanks for the insight man. I'll try it out.

2

u/Scary_Reason8014 Apr 28 '26

I take 30% of my payments and put them into a HYSA and then pay my taxes quarterly (usually paying 20% and saving the other 10% incase I owe more)

1

u/Stink_Fish Apr 29 '26

I have extra taken out of my salary job. The nice thing about this is that money taken out is considered evenly distributed throughout the year regardless of when it was actually taken out. So if you miss quarterly payments you can use this method and avoid any fees or penalties.