What Tax Form Do I Need for Self Employed?

Navigating tax obligations as a self-employed individual can be complex, unlike traditional employment where taxes are withheld. You are responsible for both income tax and self-employment taxes, which cover Social Security and Medicare contributions. This guide provides an overview of key tax forms and considerations for those operating their own businesses.

Determining Your Self-Employment Status

For tax purposes, you are considered self-employed if you operate a trade or business for profit. This definition encompasses various roles, including sole proprietors, independent contractors, freelancers, gig workers, and owners of single-member Limited Liability Companies (LLCs) that are taxed as sole proprietorships. This distinction is important because it dictates the tax forms you will use. Unlike an employee who receives a Form W-2 and has taxes withheld by their employer, self-employed individuals are responsible for calculating and paying their own taxes. If your activity is sporadic or considered a hobby without the primary purpose of generating profit, it generally does not qualify as a business for tax purposes and income is reported differently.

Key Forms for Reporting Business Income and Deductions

The primary form for self-employed individuals to report business income and expenses is Schedule C (Form 1040), Profit or Loss from Business. This form is used by sole proprietors and single-member LLCs to detail their financial performance for the tax year. All business income, regardless of its source, must be reported on Schedule C. Income received from clients, including payments reported on Form 1099-NEC (Nonemployee Compensation), is entered on Schedule C. A Form 1099-NEC is generally issued by a business if they paid you $600 or more for services in a calendar year. However, even if you do not receive a 1099-NEC for certain income, all earnings from your business activities must still be included. Schedule C also allows for the deduction of ordinary and necessary business expenses, which reduce your taxable income. These expenses must be directly related to and helpful for your business operations. Common deductible expenses include:

Office supplies
Home office expenses (calculated on Form 8829)
Business travel
Professional fees (e.g., legal or accounting)
Advertising costs
Business insurance

The form captures income and expenses to determine your net profit or loss.

Forms for Social Security and Medicare Contributions

Self-employed individuals pay self-employment tax, covering both employer and employee portions of Social Security and Medicare taxes. This tax is calculated on Schedule SE (Form 1040), Self-Employment Tax. The total self-employment tax rate is 15.3% on 92.35% of your net earnings from self-employment, consisting of 12.4% for Social Security and 2.9% for Medicare. For 2024, the Social Security portion applies to the first $168,600 of combined wages, tips, and net earnings, with no income limit for Medicare. Net earnings from Schedule C determine the amount subject to self-employment tax on Schedule SE. You can deduct one-half of your self-employment tax when calculating adjusted gross income, which helps reduce your overall income tax liability. Since no employer withholds taxes, you are generally required to pay estimated taxes quarterly using Form 1040-ES, Estimated Tax for Individuals. Payments are typically due on April 15, June 15, September 15, and January 15 of the following year (or the next business day if a date falls on a weekend or holiday). You must make estimated tax payments if you expect to owe at least $1,000 in federal tax for the year.

Additional Forms for Specific Situations

Beyond the core forms, certain self-employed individuals may need to file additional tax forms based on their specific business activities. For those who use a portion of their home exclusively and regularly for business, Form 8829, Expenses for Business Use of Your Home, is used to calculate the home office deduction. The expenses calculated on Form 8829 are then transferred to Schedule C. If your business purchases assets such as equipment, machinery, or vehicles with a useful life of more than one year, you may need to use Form 4562, Depreciation and Amortization. This form allows you to deduct a portion of the cost of these assets over their useful life, or in some cases, expense the full cost in the year of purchase under Section 179. For self-employed individuals who hire employees, different forms become relevant for reporting payroll taxes. In this scenario, you would typically use Form W-2 for reporting employee wages and Form 941, Employer’s Quarterly Federal Tax Return, to report income taxes, Social Security, and Medicare taxes withheld from employee paychecks. However, some small businesses with an annual tax liability of $1,000 or less may be eligible to file Form 944, Employer’s Annual Federal Tax Return, once a year instead of quarterly. It is also important to remember that state tax obligations exist and may require separate forms specific to your state’s tax laws.