Product Requirements Document (PRD): TaxWise Freelance

1. Executive Summary

TaxWise Freelance is a modern financial management web application designed specifically for independent contractors and gig workers in the US. By automating quarterly estimated tax calculations, providing real-time liability dashboards, and offering proactive deadline reminders, the platform eliminates "tax-season surprises." Built on a 2026-standard tech stack, it leverages AI-driven transaction categorization and high-security encryption to ensure freelancers remain compliant with IRS and state regulations while optimizing their cash flow.

2. Problem Statement

Freelancers operate without the automated withholding systems of traditional W-2 employment. This leads to:

Accuracy Issues: Difficulty in tracking fluctuating income and calculating complex marginal tax brackets.
Compliance Risk: Missed quarterly deadlines resulting in IRS/State interest and penalties.
Cash Flow Stress: Unexpectedly large tax bills at year-end due to lack of real-time visibility into tax liabilities.

3. Goals & Success Metrics

Goal 1: Provide 99.9% accurate federal/state tax estimations based on current 2026 tax laws.
Goal 2: Reduce the time spent on manual tax bookkeeping by 70% through automation.
Goal 3: Zero late-payment penalties for users following automated reminders.
Success Metrics:
- Monthly Active Users (MAU) retention > 40%.
- User Accuracy Rating: Average variance between app estimate and final filing < 2%.
- NPS (Net Promoter Score) > 60.

4. User Personas

A. Sarah, the "Full-Time Creative" (Sole Proprietor)

Role: Freelance Graphic Designer.
Needs: To know exactly how much to set aside from every client payment.
Pain Point: She often forgets the June 15th deadline and pays a penalty every year.

B. Marcus, the "Side-Hustler" (Gig Economy)

Role: Uber/DoorDash driver + Part-time W-2 job.
Needs: To understand how his side income affects his total tax bracket.
Pain Point: Difficulty combining W-2 withholdings with 1099 liabilities.

5. User Stories

As a freelancer, I want to link my bank account so that my income is automatically tracked and categorized for taxes.
As a consultant, I want to see my estimated tax liability update in real-time as I log new invoices.
As a sole proprietor, I want to receive SMS reminders 7 days before a quarterly deadline so I never miss a payment.
As a user with a spouse, I want to select "Married Filing Jointly" so the tax brackets accurately reflect my household situation.

6. Functional Requirements

6.1 Onboarding & Setup

FR-1: Users must select Federal and State jurisdictions (Support for all 50 US states).
FR-2: Support for filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household.
FR-3: Manual entry for expected annual income to initialize tax bracket logic.

6.2 Income & Expense Management

FR-4: Automated income fetching via Plaid API (using PFCv2 for Gig Income detection).
FR-5: Manual invoice entry for cash/check payments.
FR-6: Expense categorization mapped to IRS Schedule C lines (Meals, Office Supplies, etc.).

6.3 Tax Engine

FR-7: Calculation of Self-Employment Tax (15.3% on 92.35% of net earnings).
FR-8: Implementation of 2026 Federal brackets (10% to 37%) and state-specific ladders.
FR-9: Support for Safe Harbor logic (checking if 100%/110% of prior year tax is met).

6.4 Reminders & Reporting

FR-10: Automated SMS (Twilio) and Email (SendGrid) notifications for Q1-Q4 deadlines.
FR-11: Generation of pre-filled Form 1040-ES PDFs using pdf-lib.
FR-12: Real-time dashboard showing "Paid vs. Owed" for the current quarter.

7. Technical Requirements

7.1 Tech Stack (2026 Standard)

Frontend: React v19.2.3 with Tailwind CSS v4.1.18 and TypeScript.
Backend: Node.js v24.13.0 (LTS) with Express v5.1.0.
Database: PostgreSQL v18.1.
State Management: Signals (@preact/signals-react) for fine-grained reactivity in the dashboard.
Background Workers: Inngest (Hybrid approach for durable execution of reminders).
Authentication: Clerk (using Organizations for multi-tenant isolation and MFA).

7.2 Integrations

Plaid: For automated transaction syncing (Transactions for Business Beta).
API Ninjas: For real-time 2026 tax bracket verification.
Twilio/SendGrid: For multi-channel alerts.

8. Data Model

Users: id, clerk_id, email, filing_status, state_residency, encrypted_ssn (using AES-256-GCM).
IncomeEntries: id, user_id, amount, category (Plaid PFCv2), date, is_verified.
TaxRules (Bitemporal): id, jurisdiction, year, bracket_data (JSONB), effective_range (tstzrange).
TaxPayments: id, user_id, quarter, amount_paid, confirmation_number.

9. API Specification (Sample)

`POST /api/v1/income`

Description: Log a new income entry.

Request Body:

{
  "amount": 1500.00,
  "date": "2026-03-15",
  "source": "Stripe",
  "category": "Gig Income"
}

Response: 201 Created with updated total_quarterly_liability.

`GET /api/v1/tax-summary`

Description: Fetch current dashboard metrics.

Response:

{
  "federal_owed": 4250.00,
  "state_owed": 840.00,
  "next_deadline": "2026-04-15",
  "days_remaining": 31
}

10. UI/UX Requirements

Dashboard: A "gauge" chart showing the percentage of tax set aside vs. the total liability.
Income Feed: A virtualized list (React Window) for smooth scrolling through thousands of transactions.
Mobile-First: Fully responsive design using Tailwind v4's CSS-first configuration.
Accessibility: WCAG 2.1 Level AA compliance, specifically for color contrast on financial charts.

11. Non-Functional Requirements

Security:
- AES-256-GCM encryption for all PII.
- Envelope Encryption with AWS KMS.
- Compliance with IRS Publication 4557.
Performance:
- Dashboard calculations offloaded to Web Workers (Comlink) to prevent UI jank.
- API response times < 200ms for income logging.
Reliability: 99.9% uptime for the reminder service using Inngest retries.

12. Out of Scope

Full annual tax filing (1040) directly to the IRS.
Tracking of capital gains/losses from stocks or crypto (1099-B).
Corporate tax filing (1120-S / 1065).
International tax jurisdictions outside the United States.

13. Risks & Mitigations

Risk: IRS changes tax brackets mid-year (Legislative risk).
- Mitigation: Bitemporal data modeling in PostgreSQL to update rules without corrupting historical logs.
Risk: Users rely on app and still underpay.
- Mitigation: Clear disclaimers and a "Safety Buffer" feature that allows users to save an extra 2-5% over the estimate.
Risk: Financial data breach.
- Mitigation: SOC2 Type II compliance roadmap and mandatory MFA via Clerk.

14. Implementation Tasks

Phase 1: Project Setup & Auth

[ ] Initialize project with React v19.2 and Node.js v24.
[ ] Configure Tailwind CSS v4.1 with Lightning CSS engine.
[ ] Set up Clerk Auth with Mandatory MFA and Organization support.
[ ] Configure PostgreSQL v18 with AES-256-GCM encryption utilities in Node.js.

Phase 2: Core Tax Engine & Database

[ ] Design Bitemporal schema for TaxRules.
[ ] Implement Federal 2026 tax logic (Self-employment + Income tax).
[ ] Build Web Worker (Comlink) wrapper for real-time math calculations.
[ ] Create API for manual income/expense logging.

Phase 3: Plaid & Automation

[ ] Integrate Plaid Link with personal_finance_category_version: "v2".
[ ] Build mapping layer: Plaid PFCv2 $\rightarrow$ IRS Schedule C.
[ ] Implement "Confidence Score" logic for auto-categorization of income.
[ ] Set up Inngest for background transaction syncing.

Phase 4: Reminders & Notifications

[ ] Configure Inngest "Durable Workflows" for quarterly scheduling.
[ ] Integrate Twilio for SMS alerts.
[ ] Integrate SendGrid for email reports.
[ ] Build "Sudo Mode" for changing sensitive tax residency settings.

Phase 5: Reporting & PDF Generation

[ ] Implement pdf-lib logic to fill IRS Form 1040-ES.
[ ] Build "Export Data" feature for CSV/Excel (Schedule C ready).
[ ] Conduct security audit for IRS Publication 4557 compliance.
[ ] Final UI polish and accessibility testing.