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How Do I Report Self-Employment Income?

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  • Written By: M. Walker
  • Edited By: Allegra J. Lingo
  • Last Modified Date: 11 September 2016
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Workers can report their self-employment income according to various guidelines depending on their country of residence. In the US, self employment taxes must be paid for earnings greater than $400 US Dollars (USD) by filing the form Schedule SE with the 1040 form, and earnings are frequently reported using Schedule C. Freelance workers and independent contractors will often receive 1099 forms from their employers with their self-employment income listed for tax purposes. They can use these forms to report their earnings to the Internal Revenue Service (IRS) when completing tax requirements before the April 15 deadline.

Reporting self-employment income usually involves submitting Form 1040 with all earned income listed from self-employment and from wages. Schedule C forms should also be filed, and they should contain a comprehensive report of earnings and other self-employment expenses. Both independent contractors and sole proprietor businesses should complete a Schedule C. Farmers and fisherman who are self-employed, however, should complete a Schedule F form instead of a Schedule C form.

Additionally, self-employment income is frequently subject to self-employment tax for Medicare and Social Security as well as income tax. A self-employed worker should also attach a Schedule SE form to his or her 1040 form to determine the amount of self-employment tax that is due. Workers are responsible for the 13.3% tax rate for the 2011 year, which includes both the employee and the employer portions of the Social Security and Medicare taxes.

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Some workers might also be subject to estimated taxes, where they will be required to pay quarterly or monthly self-employment tax and possibly income tax throughout the year. They can report self-employment income and figure out their estimated taxes using Form 1040-ES. Self-employed workers who will be paying at least $1,000 USD in taxes and whose income tax and credits will not make up 90% of their total tax will generally need to file Form 1040-ES to pay estimated taxes. The schedule will give them predetermined payment due dates that are distributed throughout the year.

When reporting self-employment income, workers can also begin claiming various tax deductions or credits as well. Business-related expenses, such as home office expenses, utilities, or office supplies, can be deducted in many cases, and half of self-employment tax can be deducted from the income tax due when reporting income. Additionally, the total amount of self-employment income can be reduced by 7.65% before the self-employment taxes are calculated.

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