Small Business Tax Basics for the Self-Employed
Working for yourself changes how taxes work. No employer is withholding for you, and you are responsible for reporting income and expenses accurately. These basics will help you stay organized and avoid surprises.
By Lilian Oyama, Tax Preparer, FounderReviewed 6 min readSelf-employment tax
Self-employment tax is how self-employed people pay Social Security and Medicare taxes. It generally applies when your net earnings from self-employment are $400 or more for the year, in addition to regular income tax.
Reporting business income and expenses
Sole proprietors and single-member LLC owners typically report business income and expenses on Schedule C with their personal return. Income may arrive on forms such as 1099-NEC or 1099-K, but you are responsible for reporting all business income, whether or not you receive a form.
Quarterly estimated taxes
Because no employer withholds tax from business income, many self-employed people make estimated tax payments during the year. Paying too little during the year can lead to penalties, so it helps to plan your payments early.
Records that make tax season easier
- Use a separate bank account for business income and expenses.
- Keep receipts and invoices, organized by month or category.
- Keep a mileage log if you drive for business.
- Track the dates and amounts of estimated tax payments.
- Save copies of every 1099 form you receive or send.
