Self-employment tax in the US: 1099, Schedule C and the 15.3% tax

Self-employment taxes in the US work differently from an employee's taxes. An employer withholds tax from every paycheck and pays half of the Social Security and Medicare contributions itself. When you work for yourself, all of that falls on you: you figure your own profit, pay income tax and self-employment tax, and make quarterly payments during the year. Here is how it works, step by step, for the 2026 return that is filed in 2027.

Who counts as self-employed in the US

To the IRS, a self-employed person is someone who runs a business or works as an independent contractor rather than as an employee. Most often that means:

• freelancers: developers, designers, translators, marketers;
• drivers and couriers on platforms like Uber, Lyft, DoorDash and Instacart (known as gig workers);
• contractors in construction, home repair, cleaning and beauty services;
• owners of a sole proprietorship, a business run under your own name without forming a separate company;
• owners of a single-member LLC, a company with one owner that has not elected to be taxed as a corporation. For federal taxes it is disregarded, and its profit counts as the owner's personal profit.

The key threshold is $400 of net profit for the year. If your self-employment profit was $400 or more, you need to file a return and pay self-employment tax, even if you had no other income.

Forms 1099: what clients and platforms send

Form 1099 is a report that a client or payment platform sends to the IRS and to you. The IRS uses it to see your income and match it against your return.

Form 1099-NEC

A business that paid you for services issues 1099-NEC (nonemployee compensation). For payments made in 2026 the threshold went up: the form is required if a client paid you $2,000 or more during the year (it used to be $600). Starting in 2027, the threshold will be indexed for inflation.

The client must send the form by January 31. In 2027, January 31 falls on a Sunday, so forms for 2026 are due by February 1, 2027.

Form 1099-K

Payment processors and platforms that pay you send 1099-K. The threshold is back to what it was before 2022: the form is required if more than $20,000 and more than 200 payments went through the platform in a year. For details, see the IRS FAQ on Form 1099-K.

Platforms like Uber or DoorDash may send a 1099-NEC, a 1099-K, or both, depending on the type of payment. Add them up carefully so you don't report the same income twice.

Tax is owed on all of your income, not just what appears on a 1099. If a client paid you $1,500 and didn't send a form, that money still goes on your return.

Schedule C: how profit is figured

A self-employed person's income and expenses go on Schedule C (Profit or Loss From Business), which is attached to the personal return, Form 1040. The logic is simple:

1. Add up all business income for the year, with or without 1099 forms.
2. Subtract business expenses.
3. The difference is your net profit. Both taxes are figured on it.

If you have several different lines of work, for example design and delivery, you fill out a separate Schedule C for each. The profit carries over to Form 1040, and self-employment tax is figured on Schedule SE. We prepare this kind of return as part of our service for the self-employed.

Self-employment tax: 15.3%

Self-employment tax covers Social Security and Medicare contributions. An employee pays half and the employer pays the other half. A self-employed person pays both:

• 12.4% for Social Security, only on earnings up to the wage base: $184,500 in 2026 (the wage base is shared between W-2 wages and business profit);
• 2.9% for Medicare, on all earnings with no cap.

The tax is figured on 92.35% of your profit, not on all of it. With high income, an Additional Medicare Tax of 0.9% applies on amounts over $200,000 for single filers and over $250,000 for married couples filing jointly. Half of self-employment tax is deductible when you figure income tax. The official description is in IRS Topic 554.

Example

Say your net profit on Schedule C for 2026 is $50,000:

• $50,000 × 92.35% = $46,175;
• $46,175 × 15.3% ≈ $7,065 in self-employment tax;
• half of it, about $3,532, is deductible when figuring income tax.

Income tax is figured separately, at the regular rates, after the standard deduction and the QBI deduction. That is why many self-employed people set aside 25–30% of their profit for taxes.

Which expenses you can deduct

You can deduct expenses the IRS calls ordinary and necessary: common in your line of work and needed for it. Every dollar you deduct lowers both your income tax and your self-employment tax.

For drivers and couriers, the car is usually the biggest deduction. But the IRS requires a mileage log: date, route, purpose and miles. Rebuilding it from memory in April is risky; it is easier to keep one in an app from day one.

Beyond Schedule C expenses, the self-employed have other deductions too, such as health insurance premiums and contributions to self-employed retirement plans (SEP IRA, Solo 401(k)). Each has its own rules and is worth checking separately.

Every deduction depends on documentation: receipts, statements, invoices. If you have a lot of transactions, it is easier to hand the records over to bookkeeping, so your profit is already calculated when tax season arrives.

The QBI deduction: up to 20% of profit

The QBI (qualified business income) deduction lets you deduct up to 20% of your business profit from taxable income. A 2025 law made this deduction permanent.

What to know:

• while your taxable income is below the threshold (in 2026, about $200,000 for single filers and about $400,000 for joint filers), the deduction is simple to figure, on Form 8995;
• above the threshold, limits apply, especially for professional services such as consulting, legal, medical and similar fields;
• starting in 2026, there is a minimum deduction of $400 if you materially participate in the business and its profit was at least $1,000;
• QBI reduces only income tax. It has no effect on self-employment tax.

When and how to pay

The self-employed have no employer to withhold tax. So the IRS expects quarterly estimated tax payments if you will owe $1,000 or more for the year. The 2026 return must be filed and any remaining tax paid by April 15, 2027.

Ways to pay:

• IRS Individual Online Account: from a bank account with no fee, and you can see your payment history there;
• IRS Direct Pay: from a bank account with no fee and without signing in;
• the IRS app, which replaced IRS2Go in September 2026;
• debit or credit card or a digital wallet, for a processor fee;
• check by mail, which the IRS still accepts for now.

Since October 2025, EFTPS no longer accepts new enrollments from individuals, so it is better to start with your online account.

When to consider an S-corp

As profit grows, self-employment tax becomes a noticeable amount. One legal way to reduce it is S-corp status: the owner takes a reasonable salary with taxes withheld, and no self-employment tax is paid on the rest of the profit. But it adds payroll and a separate company return, so the savings need to be worked out on the numbers of your specific business.

Common self-employed mistakes

• Reporting only 1099 income. The IRS matches forms against your return, but tax is owed on all receipts, including Zelle transfers, cash and payments from foreign clients.
• Forgetting about self-employment tax. Many people figure only income tax and discover another 15.3% on top in April.
• Not keeping proof of expenses. Without receipts and a mileage log, a deduction is hard to defend in an audit.
• Mixing personal and business money. A separate business account makes bookkeeping easier and lowers the risk of mistakes.
• Overlooking state taxes. Besides federal taxes, most states have their own income tax, and sometimes there are local taxes or business fees.

What to do now

1. Gather all your 1099 forms for 2026 and match them against deposits to your account; income without a form counts too.
2. Collect proof of expenses: receipts, statements, your mileage log.
3. Check whether you made your quarterly payments: the last 2026 due date is January 15, 2027.
4. Open a separate business account and set aside part of every payment for taxes.

Self-employment taxes in the US depend on many details: your line of work, state, filing status and other income. We will figure the tax on your numbers, find the legal deductions and prepare your return. Book a consultation.