How To File

Your Self-
Employment
Taxes in 7
Easy Steps
by Sarah York, EA Updated February 24, 2022

Summary:
First, determine if you need to pay self-
employment tax, which applies to all
earned income. Then, calculate your net
income by subtracting business expenses
from your gross income, and use this to
estimate your self-employment tax at a
rate of 15.3%. Finally, ensure you make
quarterly estimated tax payments if you
expect to owe more than $1,000, and file
the necessary forms like Form 1040,
Schedule C, and Schedule SE.

Contents
Step #1: Make sure you actually have to
pay
 Step #2: Figure out how much you
earned

Step #3: Add up your business

expenses

Step #4: Estimate how much you owe

Step #5: Figure out your pay schedule

Step #6: Determine if you’re required

to file

Step #7: Fill out your tax forms

Did you know that smiling — even fake

smiling — can trick your brain into
feeling happier?

Don’t buy it? Let’s test the theory: for the

next 10 minutes, smile as big as you can
while I tell you how to give your hard-
earned money to the IRS in seven simple
steps.

That’s right! Today we’re going to smile

through the pain as we learn how
freelancers, gig workers, and
independent contractors should
calculate, pay, and file their self-
employment taxes. Ready? Let’s go!

Step #1: Make sure you

actually have to pay
Not everyone is subject to self-
employment tax, but you’ll likely have to
pay it if you are:

A sole proprietor

An independent contractor

A freelancer

A small business owner

A gig worker

A side hustler — even if you’re

receiving W-2 income as well

Here’s the bottom line: self-employment

taxes apply to all “earned income,” which
is money received in exchange for a
product or service. That’s true whether
or not it’s your main source of income.

For instance, let’s say you work a

standard 9-to-5 job, but sell your
handmade jewelry on Etsy for a bit of
extra cash. Your sales are subject to self-
employment tax!

How much is self-employment tax?

Let’s take a moment to make sure we

understand self-employment tax. If you
work for yourself, it’s how you pay FICA
taxes, which comprise Social Security
and Medicare taxes. These are
automatically withheld from W-2
employees’ paychecks.

Since freelancers and self-employed

individuals don’t have employers, they
get the special privilege of paying this
themselves, for a whopping tax rate of
15.3%. Regrettably, this is added on top
of your federal and state income taxes.

To learn more — including why this rate

is so high — check out our guide to self-
employment tax. In the meantime, how’s
that smile holding up?

Step #2: Figure out how

much you earned
This is the starting point for all taxes: you
need to know how much you received in
income before anything else can be
relevant. If you don’t have a good set of
records to rely on, the year-end tax
forms you receive will be key.

If you earned more than $600 from a

single client or work platform they will
likely send you a 1099-NEC by January
31st. You might also receive a 1099-K,
reflecting payments you received
through a third-party payment
processor like PayPal or Stripe.
You can use these statements to
recreate your income for the year. I also
highly recommend sifting through your
bank statements for any income that
might have been missed, or that falls
under the $600 reporting threshold.
(Just because it wasn’t reported by the
customer doesn’t mean it’s not taxable!)

Step #3: Add up your

business expenses
Ideally, you’ve been using the Keeper
app to track your business expenses
throughout the year. If not, shame on
you.

Kidding! We don’t judge around here

(unless you’re one of those freaks who
puts Ranch Dressing on watermelon).

Since you already have your bank

statements open, go ahead and scan for
business-related expenses while you’re
at it. And don’t forget to check your
credit card purchases as well!
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More Articles to Read

A Beginner's Guide to Self-Employment
Taxes
Common business expenses for
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Can You File Your Own Business Taxes?

If you’re not sure whether something

The Last Schedule C Guide You'll Ever
counts as a write-off, check Keeper’s Need
free resources page! Or to make things
even easier, download the app and
connect your accounts so that we can
Free Tax Tools
do the sifting (and tax filing!) for you.
1099 Tax
Some common business expenses Calculator
include:

Your phone bill Quarterly Tax

Office supplies Calculator

Computer and software

How Much Should I
 Continuing education Set Aside for 1099
Taxes?
Auto expenses

Marketing and advertising

Knowledge is power. Share this resource
Once you have a good idea of your with other solopreneurs
annual business expenses, you can
subtract them from your gross income to
determine how much you’ll actually be
taxed on.

Doing this at the last minute? Don’t feel

too bad: it’s not uncommon for
freelancers to put off thinking about
recordkeeping and taxes until the end of
the year, so you’re in good company.

That being said, be better. Use Keeper.

 Over 1M
freelancers
trust
Keeper
with their
taxes
Keeper is the top-
rated all-in-one
business expense
tracker, tax filing
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Try free

Step #4: Estimate how

much you owe
Now you just have to figure out how
much to pay. If this is your first year
going solo, be prepared for a much
higher tax bill than normal thanks to that
15.3% self-employment tax.

Unfortunately, paying self-employment

tax isn’t the only thing that makes tax
season harder on freelancers. One of the
silver linings of W-2 work is fewer
surprises when it’s time to pay.

Income and FICA taxes are automatically

withheld by the employer and remitted
to the IRS at the time they’re accrued.
Self-employed folks, on the other hand,
have a harder time automating their tax
bill.

Calculating your freelance tax bill

Remember that work I made you do in

steps 2 and 3? Now you get to use it! To
estimate your SE tax, you need to find
your net income. This is your income
after subtracting business expenses.

For example, let’s say you earn $10,000

in gross income and have $5,000 in
business expenses. Your net income
would be $5,000. You’ll owe SE tax on
this $5,000, not the full $10,000. So your
SE tax would be $765 ($5,000 x 15.3%).

If you’d like to use a shortcut here,

Keeper offers a free 1099 tax calculator
that can do this calculation for you.

Simply input your information:

And voila! An accurate estimate of what
you’ll owe for your self-employment tax,
federal income taxes, and state income
taxes:

Step #5: Figure out your

pay schedule
Many people aren’t aware of this, but
taxes aren’t technically due April 15th.
They’re due at the time the income is
earned. This is why employers remit
payroll taxes throughout the year.

Freelancers and independent

contractors, of course, don’t have
employers to do this for them.
Consequently, many of them are
required to pay their taxes quarterly, in
the form of “estimated tax payments.”
These payments are due by the 15th
business day in the month following the
end of a quarter:

Quarter 1 (Jan-Mar) is due April 15th

Quarter 2 (Apr-May) is due June 15th

Quarter 3 (Jun-Aug) is due October

15th

Quarter 4 (Sep-Dec) is due January

 15th

Anyone who expects to owe more than

$1,000 to the IRS is required to make
quarterly payments or face
underpayment penalties.

Think that might be you? Use our

quarterly tax calculator to figure out
exactly how much you should pay by the
next estimated due date (and if you
should even be paying in the first place).

Your quarterly payments can be made

directly to the IRS through their free
payment portal.

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Step #6: Determine if

you’re required to file
For taxpayers who only have W-2
income, if their earnings for the year
were less than the standard deduction
($12,400 for 2021), they don’t have to file
a tax return at all.

Self-employed individuals, on the other

hand, get the short end of the stick. If
you have net earnings of $400 or more,
you’re required to file a tax return.

The IRS does this in order to collect your

self-employment tax. You won’t owe
income tax if your earnings are that low,
but you might still owe self-employment
tax.

Top 5 Tax Mistakes to Avoid | Free…

Step #7: Fill out your tax

forms
If you’re doing your taxes yourself, these
are the forms you’ll have to deal with on
your annual return:

Form 1040

This should be familiar to most of you.

1040 is the form that individual taxpayers
use to report all their taxable income and
calculate their taxes.

Schedule C

This form is for sole proprietors or

anyone else with self-employed income.
You’ll use this to report your gross
business income and expenses.

The net profit on line 31 of the Schedule

C carries to Schedule 1 of the 1040 and
Schedule SE to calculate the taxes you
owe.

Your Schedule C will be attached to your

Form 1040 when you file your federal
taxes.

When you fill out your Schedule C, you’ll

see that it lists several categories of
business expenses. Many of these are
easy to understand, but some can be
confusing.

Let’s briefly look at some of the harder

categories. And if you'd like a detailed,
step-by-step walkthrough, take a look at
our comprehensive guide to filling out
your Schedule C.

Cost of Goods Sold

This category is used to report the price

of inventory. It includes both physical
and virtual products. For instance, if you
sell online advertising, the cost of
acquiring the digital ad space could be
listed here.

Be sure to fill out the Cost of Goods Sold

section on page 2 of the Schedule C if
you plan to use this line.

Helpful hint: Most taxpayers use the

“cost” method to value their inventory.

Auto expenses

If you’re claiming auto expenses, you will

have to fill out part IV of the Schedule C
on page 2 before entering the total on
line 9 of page 1.

Pro tip: You may also be required to fill

out Form 4562 if you’re planning to
depreciate your vehicle — more on that
right below! If you neglect to answer the
questions on page 2, your vehicle write-
off could be denied.

Depreciation expenses

This is where you record the combined

depreciation on all your fixed assets for
the year.

To use this category, you’ll need to fill

out Form 4562 showing all your fixed
assets (such as machinery, equipment,
and autos) and their basis and
depreciation methods.

Home office deduction

If you plan to itemize your home office

deduction instead of claiming the
simplified amount, you’ll need to
complete Form 8829 and attach it to the
return.

The total on Form 8829 will carry to line

30 of your Schedule C.

If all this feels like too much to keep

track of, the Keeper App is able to fill out
these forms and categorize your
expenses for you. Why add the
headache of filing your tax return on top
of the pain of owing self-employment
tax?

Schedule SE

Schedule SE is used to calculate your

self-employment taxes. You’ll fill this out
alongside your Schedule C and also
attach it to your 1040 when you file.

Alternatively, you can upload your data

to the Keeper app, and we can do the
filing for you.

Now that is a reason to smile.

Expense
tracking
has
never
been
easier
Keeper is the
top-rated all-
in-one business
expense
tracker, tax
filing service,
and personal
accountant.

Get
started

Sarah
York, EA
Sarah is an
Enrolled Agent
with the IRS and
a former staff
writer at Keeper.
In 2022, she was
named one of
CPA Practice
Advisor’s 20
Under 40 Top
Influencers in the
field of
accounting. Her
work has been
featured in
Business Insider,
Money Under 30,
Best Life,
GOBankingRates,
and Shopify.
Sarah has spent
nearly a decade
in public
accounting and
has extensive
experience
offering strategic
tax planning at
the state and
federal level. Her
clients have
come from a
wide range of
industries,
including oil and
gas,
manufacturing,
real estate,
wholesale and
retail, finance,
 and ecommerce,
and she has
handled tax
returns for C
corps, S corps,
partnerships,
nonprofits, and
sole
proprietorships.
In her spare time,
she is a devoted
cat mom and
enjoys hiking,
painting, and
overwatering her
houseplants.

At Keeper, we’re on a mission to help

people overcome the complexity of
taxes. We’ve provided this information
for educational purposes, and it does
not constitute tax, legal, or accounting
advice. If you would like a tax expert to
clarify it for you, feel free to sign up for
Keeper. You may also email
[email protected] with your
questions.
44 Montgomery St, Suite 02-176, San Francisco

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