How to File Self-Employment Taxes (Understanding the Forms & Process)

If you’re self-employed, it is important to remember that your tax situation will be different from those who just have an employer, meaning that you will need to use some different forms to file your taxes. But don’t fret: TurboTax will ask you simple questions about you and your business and give you the tax deductions and credits you are eligible for based on your answers, saving you money for your business.

To help get you prepared for this tax season, here are the forms you may need to file if you are self-employed.

Forms You May Receive

Form 1099-MISC: Starting in tax year 2020, Form 1099-MISC was replaced by Form 1099-NEC (non-employee compensation) for your freelance, side gig, or self-employed income. However, you still may receive a 1099-MISC for any other miscellaneous income you earned such as: 

• $10 or more in royalties or broker payments in lieu of dividends or tax-exempt interest.
• $600 or more in:
  • Rents.
  • Prizes and awards.
  • Other income payments.
  • Medical and health care payments.
  • Crop insurance proceeds.
  • Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish.
  • Generally, the cash paid from a notional principal contract to an individual, partnership, or estate.
  • Payments to an attorney.
  • Any fishing boat proceeds.
  • $5,000 or more of direct sales of consumer products for resale anywhere other than a permanent retail establishment

Note there are various forms of 1099s that report everything from income from self-employment earnings (1099-NEC), interest and dividends (1099-INT, 1099-DIV), government payments (1099-G), and more.

Form 1099-NEC (non-employee compensation): Will be issued to self-employed individuals like independent contractors, freelancers, or side-giggers who have been paid $600 or more. Though wages might not trigger a 1099-NEC if they are under $600, you are still responsible for reporting all income whether a 1099-NEC was received or not. As a self-employed person, you are required to report your self-employment income if your net earnings from self-employment are $400 or more.

Form 1099-K: If you earned income as a freelancer working in the on-demand economy like Uber or Lyft you may see this form. Form 1099-K reports income processed through third-party settlement organizations (TPSOs), such as PayPal or Venmo.  The American Rescue Plan of 2021 changed TPSO reporting requirements to payments processed exceeding $600. However, the IRS announced another delay in reporting thresholds for TPSOs. As a result of this delay, TPSOs will not be required to report tax year 2023 transactions on a Form 1099-K at the lower amount of over $600. This means that for tax year 2023 (the taxes you file in 2024) the existing 1099-K reporting threshold of the aggregate of more than $20,000 in payments and  over 200 transactions will remain in effect. The IRS is currently planning for a threshold of $5,000 for tax year 2024 (the taxes you file in 2025) as part of the phase in to implement the lower over $600 threshold enacted under the American Rescue Plan. 

1095 A, B or C: Depending on your health insurance coverage, you may receive one of these three forms detailing your health insurance. You do not need 1095-B or 1095-C to file your taxes, they are just for your records. If you purchased your health insurance in the Health Insurance Marketplace, you will receive Form 1095-A, which is just like entering a W-2 in TurboTax. You may also be able to automatically upload your 1095-A pdf in TurboTax to eliminate data entry.

Forms You May File

Form 1040: The IRS Form 1040 is one of the official documents that U.S. taxpayers can use to file their annual income tax return. The form is divided into sections where you can report your income and deductions to determine the amount of tax refund you can expect to receive or figure out your tax liability.

Schedule C: A Schedule C is used  to report self-employment income. You file a Schedule C, Profit or Loss from Business with your Form 1040. Schedule SE: The Schedule SE is used to calculate and report your taxable self-employment income. This form allows you to report your Social Security and Medicare taxes. The Schedule SE should be filed with your Form 1040.  TurboTax automatically figures out your self-employment income for you based on your net income from your business.

Don’t worry about knowing how to fill out these forms. TurboTax will ask you simple questions about you and your business and give you the tax deductions and credits you’re eligible for based on your entries.