What's different now that I'm self-employed?
If this is the first time you’ve had self-employment income, your return might look a little different this year. Let’s review some of the forms and calculations that may not be familiar.
Form 1040, also known as “the long form”, is used when you have self-employment income.
1099-MISC or 1099-K
Instead of a W-2, you’re likely to receive a 1099-MISC or a 1099-K for your self-employment income. Even if you don’t get either form, you still report any cash, personal checks or credit card payments you received.
Schedule C, Profit or Loss from Business
Schedule C is used to calculate your net profit or loss, and lists the payments you received and your related expenses. Your net profit or loss is carried to Line 12, Business income or loss on your 1040.
Schedule SE, Self-Employment Tax
Schedule SE is used to calculate your Social Security and Medicare taxes based on your net income from Schedule C. When your net income is $400 or more, you pay self-employment tax of 15.3% with 12.4% for Social Society and 2.9% for Medicare. You’ll find this amount on Line 57, Self-employment tax on your 1040.
Deduction for self-employment tax
This deduction is half the amount you pay in self-employment tax from Schedule SE. It lowers your adjusted gross income. It’s found on Line 27, Deductible part of self-employment tax on your 1040.
Estimated tax payments
Because taxes aren’t withheld from your self-employment income, you can choose to make quarterly estimated tax payments throughout the year. Otherwise, you’ll pay what you owe when you file your return. We’ll calculate your estimated tax payments for next year, if you’d like to avoid having to pay all your taxes at once.