How to file taxes for the self-employed 2024

Filing taxes when you’re self-employed can be, well, taxing. But there are steps you can take to make the process easier. The steps are:

1. Start early: Mark when tax returns are due.

2. Decide how you want to file.

3. Know your entity.

4. Gather your documents.

5. Complete the forms you need.

6. Work the deductions.

What is self-employment tax?

The federal self-employment tax is composed of Social Security and Medicare taxes, which are also known together as the Federal Insurance Contributions Act (FICA). For 2024, the self-employment tax rate is 15.3%, with 12.4% for Social Security and 2.9% for Medicare. Social Security taxes are not owed on income above $160,200; however, Medicare taxes are and, in fact, you may owe more than 2.9%, depending on your income. 

The reason it’s called self-employment tax is because when you are an employee, the company you work for pays for half of your FICA taxes on your behalf. Someone who is self-employed must pay both the employee and employer portions.

You’ll owe self-employment taxes on any “earned income” of $400 or more that you received pre-tax. Earned income is money you get as compensation for working and includes wages, salaries and tips, which likely includes any money you earned as an independent contractor or from your own business.

Self-employment tax is calculated using Schedule SE from IRS Form 1040 or Form 1040-SR.

You don’t need to pay self-employment tax if your net annual earnings from self-employment are less than $400 (less than $108.28 if you’re a church employee).

1. Start early: Mark when tax returns are due

Federal tax returns typically are due each year on April 15. But if the date falls on a Saturday, Sunday or legal holiday, the deadline shifts to the following business day.

In 2024, the tax return filing deadline is April 15. 

If that deadline looks too close, you might consider filing for an extension. Once the IRS approves your extension request, you’re given until Oct. 15 to file your return for the latest tax year. As with the regular deadline, the extended deadline moves to the following business day if it falls on a Saturday, Sunday or legal holiday.

Note that even if you get an extension, any taxes owed are still due on April 15. You need to pay up — you just don’t have to submit the paperwork until October. 

Given the complexities of tax filing for self-employed people, it might be good to get a jump on tax preparation if you work for yourself.

“Self-employed people have a lot more work to get prepared for tax season than taxpayers whose income comes from an employer. However, a lot of that work helps to reduce taxes,” said Mark Luscombe, a certified public accountant (CPA), attorney and principal analyst at Wolters Kluwer in Chicago.

2. Decide how you want to file

Even if you’re self-employed, you can choose the basic method of completing your federal tax return — filing directly with the IRS.

You can electronically submit your return to the IRS at no cost if your adjusted gross income doesn’t exceed $79,000. If your income surpasses that threshold, you can use a fillable electronic tax form and file it online for free or fill out a paper return and mail it to the IRS.

However, self-employed taxes are usually more complicated than a simple return with just one W-2, so you may want some help from either tax software or an accountant. 

Tax software vs. an accountant: Do you need them?

Other than filing directly with the IRS, you could rely on tax software or a tax professional, such as an accountant, to prepare and submit your federal tax return.

Using tax software

While some tax preparation software is free, many require paid upgrades to use forms beyond the basic. (Cash App Taxes is an exception.)

You can find plenty of tax software packages that are geared toward self-employed people — for a price. The cost may be worth it, however. Some include year-round support and point out specific deductions.

Keila Hill-Trawick, founder and CEO of Little Fish Accounting in Washington, D.C., recommended going beyond tax software if you’re fully self-employed.

“Once tax time comes around, [accounting software] can help streamline and simplify the experience by generating the reports you need to populate your tax forms at a moment’s notice,” Hill-Trawick said. 

Using an accountant

The IRS points out that using a reputable tax preparer — including a CPA or enrolled agent — can help prevent errors on your return. 

Hiring a tax professional might:

• Save you time that’s better spent on generating revenue.
• Answer questions at tax time and throughout the year. 
• Avoid the need to figure out jargon and new tax laws.
• Uncover ways to ease your tax burden.
• Help you steer clear of an IRS audit.

“Even with thorough preparation, consulting a tax professional familiar with self-employment tax nuances can be invaluable; they can offer personalized advice and help identify overlooked opportunities or pitfalls,” said Sean Lovison, founder and lead planner at Purpose Built Financial Services. 

Having an accountant who knows you and your business personally may be a vital support for your business, not just at tax time, but all year. 

3. Know your entity

The business entity you use as a self-employed person can make a big difference in what tax advantages apply.

Luscombe said the simplest business structure for a self-employed person is a sole proprietorship that reports business income and expenses on Form 1040 Schedule C. However, self-employed people might benefit from more complex business structures, such as an S corporation (S corp), limited liability company (LLC) or partnership.

“The way you form your business drives your taxes and influences the way you’re taxed,” said enrolled agent Karla Dennis, founder of Karla Dennis and Associates, a business services provider headquartered in La Palma, Calif.

4. Gather your documents

You are going to need a few key pieces of information to file your taxes. They may include: 

• Profit and loss statement.
• Estimated tax payment receipts.
• Any 1099s you’ve received.
• Payroll summary, if you have employees.
• Mileage records or other documents for business vehicle costs.
• Home office information.
• Documentation for business expenses.

Your accountant may ask for additional information — be prepared to respond to their requests for documents as you go through the process. 

In addition to your business taxes, you’ll also be filing your personal taxes, so you’ll need all the regular information for those as well. This may include W-2 income, mortgage interest statements, charitable contribution information, IRA contribution records and more. 

5. Complete the forms you need

You (or your tax professional) may need to submit an array of tax forms, including:

• Form 1040 as a general, annual tax return.
• Schedule C for reporting self-employment income or losses.
• Schedule SE for reporting Social Security and Medicare taxes.
• Schedule 1 for reporting income not listed on Form 1040.
• Schedule 2 for reporting additional taxes owed, such as self-employment tax.
• Schedule 3 for reporting capital gains and losses.
• Form 4562 for claiming a depreciation or amortization deduction.

6. Work the deductions

One of the smartest things a self-employed person can do is make the most of available tax deductions. You only have to pay income taxes on your profits, which are calculated as revenue minus deductions.

You can count any business expense as a deduction if the cost is ordinary and necessary for your business. Your profit and loss statement will list all of your expenses, but other deductions worth exploring are:

• Using part of your home as a home office.
• Using your car for business purposes.
• Depreciation on business property.
• Retirement savings.
• Health care expenses.
• Tax payments.

If you’re uncertain which deductions you can claim, consider reaching out to a tax professional.

Thinking ahead: Our tips for making tax season simple for your small business

Here are five tips to simplify tax season for your small business:

1. Be sure your business and personal expenses are separate. Separating these expenses can make tax season less of a headache.
2. Update your bookkeeping. Ensure all your business transactions for the year are recorded in your books.
3. Organize your paperwork. Gather all of the documents you’ll need for tax filing, such as 1099 forms and receipts for business expenses.
4. Reconcile bank and credit card statements. This involves comparing these statements with your bookkeeping records.
5. Keep track of tax deadlines. Missing a tax deadline could result in financial penalties.

Frequently asked questions (FAQs)

How do I file taxes if I’m self-employed?

If you’re self-employed, you can file taxes in several ways:

• Do it on your own and file directly with the IRS.
• Use tax software to guide you through the tax-filing process.
• Use an online tax preparation service like H&R Block or Intuit TurboTax.
• Rely on a tax professional, such as an accountant or enrolled agent.

Can you get a tax refund if you are self-employed?

You will get a tax refund if you overpaid your quarterly taxes during the year.

Do I need a 1099 to file self-employment taxes?

You don’t necessarily need a Form 1099 to file self-employment taxes. If you’re paid at least $600 from one source of self-employment income, you’re supposed to receive a 1099 to reflect that income. But if your income from a single source falls below $600, a 1099 doesn’t need to be issued. 

Nonetheless, you still must report all self-employment income, regardless of the amount.

How do you prove income if you are self-employed?

You can prove self-employed income with your tax return, including the 1040 and 1099 forms, bank statements and profit-and-loss statements.