How to File Self-Employment Taxes

When I quit my 9-to-5 in 2018 to freelance full-time, my first “welcome to independence” moment wasn’t a big client check it was a letter from the IRS reminding me about self-employment taxes. No employer was withholding anything anymore, and suddenly I was on the hook for Social Security, Medicare, and income tax. If you’re a freelancer, gig worker, or side-hustler in the United States, this guide is the roadmap I wish I’d had. I’ll walk you through every step of filing self-employment taxes with the exact forms, deadlines, and tricks I use to keep the IRS happy and my wallet intact.

What Are Self-Employment Taxes, Really?

Self-employment taxes are the combination of Social Security tax (12.4% on the first $168,600 of net earnings in 2024) and Medicare tax (2.9% with no cap). Employees split this 15.3% with their boss; as a sole proprietorship, freelancer, or independent contractor, you pay the full amount but you get to deduct half on your return.

“The self-employment tax is essentially your FICA contribution when there’s no employer,” explains CPA Barbara Weltman in J.K. Lasser’s Small Business Taxes. “Think of it as the price of being your own boss.”

Add federal (and possibly state) income tax on top, and you’re looking at 25–35% of net profit going to Uncle Sam if you don’t plan ahead.

Step 1: Know If You Even Owe Self-Employment Taxes

The IRS says you must file Schedule SE if your net profit from self-employment is $400 or more in a year. That’s the magic threshold. Earn $399? No SE tax. Earn $400? You owe on the whole amount.

Quick test I run every December:

• Gross income from 1099s
• Minus business expenses
• = Net profit

If ≥ $400 → keep reading.

Step 2: Gather Your Paperwork (Before Panic Sets In)

I keep a manila folder labeled “TAX STUFF DO NOT LOSE.” Inside:

• 1099-NEC (for client payments ≥ $600)
• 1099-K (from PayPal, Venmo, Stripe if ≥ $600 in 2024)
• Bank statements
• Receipts for every business expense (more on those later)
• Mileage log (I use the MileIQ app)
• Prior-year return (for carryovers)

Pro tip: Scan everything to a cloud folder. The IRS lost my 2020 docs once; digital backups saved me.

Common 1099 Mistakes I Learned the Hard Way

• Clients sometimes send 1099s in February don’t file until you have them all.
• If a client forgets, you still report the income. The IRS matches 1099s to your SSN.

Step 3: Calculate Gross Income vs. Net Profit (Schedule C)

This is where most freelancers trip. Gross income is everything you were paid. Net profit is what you actually owe tax on after tax deductions.

I use Schedule C (Form 1040) to report:

Line	What I Enter	Example
1	Gross income (1099s + cash)	$85,000
3	Gross profit (usually same as Line 1)	$85,000
5	Total business expenses	$22,500
7	Net profit (Line 3 – Line 5)	$62,500

My Go-To Business Expense Checklist

• Home office (square footage × IRS simplified rate: $5/sq ft up to 300 sq ft)
• Internet (percentage used for work)
• Software (Adobe, QuickBooks, Zoom)
• Advertising (Instagram ads, website)
• Supplies (camera gear, printer ink)
• Mileage (67¢/mile in 2024)
• Health insurance premiums (100% deductible if self-employed)

I snapshot every receipt with the Expensify app zero paper clutter.

Step 4: Pay Quarterly Estimated Taxes (Form 1040-ES)

The IRS wants money as you earn it. Miss quarterly taxes, and you’ll owe underpayment penalties (currently ~8% annualized).

2024 Deadlines (for 2025 income):

1. April 15
2. June 15
3. September 15
4. January 15 (next year)

How I calculate each payment:

1. Estimate annual net profit
2. Multiply by 92.35% (the “magic number” after SE deduction)
3. Apply tax rates (15.3% SE + your income bracket)
4. Divide by 4

Example: $60,000 net profit
$60,000 × 92.35% = $55,410
SE tax = $55,410 × 15.3% = $8,478
Income tax (22% bracket) = $55,410 × 22% = $12,190
Total tax = $20,668 → $5,167 per quarter

I set calendar reminders and pay via IRS Direct Pay takes 3 minutes.

Starting your own business? You may also find How to Start an Online Business With No Money helpful as you build your self‑employment journey.

Step 5: File Your Annual Return (Form 1040 + Schedules)

Come April, I open TurboTax Self-Employed (or hand my folder to my CPA). The flow:

1. Form 1040 – Main return
2. Schedule C – Profit/loss
3. Schedule SE – Self-employment tax
4. Form 1040-ES vouchers (if still paying quarterly)

Bold move that saved me $1,200 last year: I elected the Qualified Business Income (QBI) deduction—up to 20% off net profit for pass-through businesses. TurboTax prompts for it; don’t skip.

State Taxes Don’t Forget

Forty-one states have income tax. I live in Texas (no state income tax win!), but if you’re in California, add 1–13.3% on top. Check your state’s revenue website for forms.

Step 6: Double-Check and E-File

I always:

• Reconcile 1099 totals to my bank deposits
• Verify Social Security tax cap ($168,600 in 2024)
• Attach PDF receipts if audited (rare, but prepared)

E-file by April 15 (or October 15 with extension but pay any balance by April to avoid penalties).

Key Takeaways

• File Schedule SE if net profit ≥ $400.
• Pay quarterly taxes on April 15, June 15, Sept 15, Jan 15 to avoid penalties.
• Track every business expense home office, mileage, software all deductible.
• Use 1099-NEC and 1099-K to report income; don’t wait for them to file.
• Take the QBI deduction (up to 20%) and deduct half your SE tax.

FAQ

What is Self-Employment Tax and what federal taxes does it cover?

Self-Employment Tax is the combined Social Security and Medicare taxes for individuals who work for themselves. It covers both the employer and employee portions, totaling **15.3%** of your net earnings (12.4% for Social Security and 2.9% for Medicare).

What is the most important form I need to file for self-employment income?

The most important form is **Schedule C (Form 1040)**, which you use to report your income and expenses from your business. Additionally, you must use **Schedule SE (Form 1040)** to calculate the amount of Self-Employment Tax you owe.

How often must I pay self-employment taxes?

You must generally pay estimated taxes quarterly if you expect to owe at least $1,000 in taxes for the year. The IRS requires you to make **quarterly estimated tax payments** on the 15th of April, June, September, and January.

Can I deduct business expenses to lower my taxable income?

Yes, absolutely. You must track and deduct all **ordinary and necessary business expenses** (like office supplies, home office deduction, business travel, software subscriptions, etc.) on Schedule C. This is crucial for accurately determining your net profit and lowering your tax liability.

What is the current threshold for having to file self-employment taxes?

You must file a tax return and pay self-employment taxes if your **net earnings** from self-employment were **$400 or more** during the tax year. If your net earnings are less than $400, you are still required to report the income but may not owe the Self-Employment Tax.

Conclusion

Filing self-employment taxes felt like decoding hieroglyphics my first year, but now it’s a 2-hour ritual every quarter. The peace of mind from knowing I won’t owe a five-figure surprise in April? Priceless. Start with a simple spreadsheet, pay those estimated taxes like clockwork, and deduct every legit business expense. You’re not just complying with the IRS you’re building a sustainable freelance life. Grab that folder, open a fresh spreadsheet, and let’s keep more of your hard-earned money in your pocket.