Can anyone confirm the self-employment tax process?

Mik009
Mik009 Member Posts: 1 Newcomer
in General

I'm transitioning to self-employment/1099 work and wanted to share my understanding of the tax process and get confirmation I'm not missing anything.

My state doesn't have income tax so I shouldn't have anything to do with state tax.

Step 1

As a 1099 worker, you pay two types of federal tax:

  1. Self-employment (SE) tax. Social Security + Medicare. Paying the full 15.3% (on 92.35% of net income).
  2. Federal income tax. Same brackets as everyone else, but some adjustments.

Step 2

IRS expects estimated payments four times a year (if you'll owe $1,000+ at filing). You can pay via IRS Direct Pay via a Business(?) account.

Step 3

End of year, file a regular Form 1040, plus:

  • Schedule C — reports your business income and expenses
  • Schedule SE — calculates your self-employment tax
  • Schedule 1 — carries the half-SE-tax deduction to your 1040

Is that it? Nothing I have to do throughout the year or anything else I have to submit per-end of year tax?

Appreciate any input, it sounded intimidating at first but now seems kind of simple.

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Answers

  • MatthewD
    MatthewD FreeTaxUSA Admin, FreeTaxUSA Agent Posts: 963 image
    Hi Mik009,

    You are right about the two types of tax. FICA (Self-employment tax) and federal income tax.

    The IRS has a pay-as-you-go payment system, so paying quarterly taxes will prevent any underpayment penalties.

    And yes, report your income on a Form 1040 plus the Schedule C which will calculate both SE tax and income tax.

    Input: Keep accurate records. Track your business and total miles. If you travel overnight, keep all your travel and meal expenses. Print out a blank copy of the Schedule C to get ideas and review articles in the community regarding business income, etc.

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