Can anyone confirm the self-employment tax process?

Mik009

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.

MatthewD

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.