Generally, you are self-employed if any of the following apply to you.
As a self-employed individual, generally you are required to file an annual income tax return and pay estimated taxes quarterly.
Self-employed individuals generally must pay self-employment (SE) tax as well as income tax. SE tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. In general, the wording "self-employment tax" only refers to Social Security and Medicare taxes and not any other tax (like income tax).
Before you can determine if you are subject to self-employment tax and income tax, you must figure any net profit or net loss from your business. You do this by subtracting your business expenses from your business income. If your expenses are less than your income, the difference is net profit and becomes part of your income on page 1 of Form 1040 or 1040-SR. If your expenses are more than your income, the difference is a net loss. You usually can deduct your loss from gross income on page 1 of Form 1040 or 1040-SR. But in some situations your loss is limited. See Publication 334, Tax Guide for Small Business (For Individuals Who Use Schedule C), for more information.
You have to file an income tax return if your net earnings from self-employment were $400 or more. If your net earnings from self-employment were less than $400, you still have to file an income tax return if you meet any other filing requirement listed in the Form 1040 and 1040-SR instructions PDF .
As a self-employed individual, estimated tax is the method used to pay Social Security, Medicare, and income taxes; this is because you do not have an employer withholding these taxes for you. Form 1040-ES, Estimated Tax for Individuals PDF , is used to figure these taxes. Form 1040-ES contains a worksheet that is similar to Form 1040 or 1040-SR. You will need your prior year’s annual income tax return in order to fill out Form 1040-ES.
Use the worksheet found in Form 1040-ES PDF to find out if you are required to pay estimated taxes quarterly.
Form 1040-ES PDF also contains blank vouchers you can use to mail your estimated tax payments. Other payment options, including pay by phone and online methods, can be found at IRS.gov/payments. If this is your first year being self-employed, you will need to estimate the amount of income you expect to earn for the year. If you estimated your annual earnings too high, simply complete another Form 1040-ES worksheet to refigure your estimated tax for the next quarter. If you estimated your annual earnings too low, again complete another Form 1040-ES worksheet to recalculate your estimated taxes for the next quarter.
See the estimated taxes page for more information. The self-employment tax page has more information on Social Security and Medicare taxes.
To file your annual income tax return, you will need to use Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship), to report any income or loss from a business you operated or profession you practiced as a sole proprietor, or gig work performed. Schedule C instructions PDF may be helpful in filling out this form.
In order to report your Social Security and Medicare taxes, you must file Schedule SE (Form 1040 or 1040-SR ), Self-Employment Tax PDF . Use the income or loss calculated on Schedule C to calculate the amount of Social Security and Medicare taxes you should have paid during the year. The instructions for Schedule SE PDF may be helpful in filing out the form.
If you made a payment as a small business or self-employed (individual), you are most likely required to file an information return to the IRS. In some situations, if you received a payment as a small business or self-employed (individual), you may be required to file an information return to the IRS. See, Am I required to file a Form 1099 or other information return, for additional information.
When beginning a business, you must decide what form of business entity to establish. Your form of business determines which income tax return form you have to file. The most common forms of business are the sole proprietorship, partnership, corporation, and S corporation. A Limited Liability Company (LLC) is a relatively new business structure allowed by state statute. Visit the business structures page to learn more about each type of entity and what forms to file.
If you use part of your home for business, you may be able to deduct expenses for the business use of your home. The home office deduction is available for homeowners and renters and applies to all types of homes.
Married couple's business
The employment tax requirements for family employees may vary from those that apply to other employees. On this page we point out some issues to consider when operating a married couple's business.
Election for married couple's unincorporated businesses
For tax years beginning after December 31, 2006, the Small Business and Work Opportunity Tax Act of 2007 (Public Law 110-28) provides that a "qualified joint venture," whose only members are a married couple filing a joint return, can elect not to be treated as a partnership for Federal tax purposes.
The Small business taxes: The virtual workshop is composed of nine interactive lessons designed to help new small business owners learn their tax rights and responsibilities. The IRS video portal contains video and audio presentations on topics of interest to small businesses, individuals, and tax professionals.