TurboTax / Tax Calculators & Tips / All Tax Guides / Self-Employment Taxes / Self-Employed Less Than a Year? How to Do Your Taxes

Self-Employed Less Than a Year? How to Do Your Taxes

Updated for Tax Year 2016


OVERVIEW

Have you been self-employed less than a year? If you’re just starting out, it’s possible you worked at a job earlier in the tax year before making the switch to self-employment, or you’re working multiple jobs. In this case, you may have more than once source of income you’ll need to report on your income tax return.


Receiving W-2 and 1099 Tax Forms

Man working in his chocolate shop

If you were employed for part of the year, your employer will likely report your employee income to the Internal Revenue Service (IRS) on Form W-2. In addition, you may also receive self-employment income that your customers reported to the IRS on a 1099-MISC form. Finally, you may have income collected from customers during the course of doing business that does not get reported on a 1099-MISC form. You must report all these sources of income.

Self-Employment Tax

When you work for someone else, you pay half your Medicare and Social Security taxes, and your employer contributes the other half. These are sometimes known as FICA or payroll taxes.

When you’re self-employed, you are responsible for paying all the payroll tax yourself on the income earned from your business. This is the self-employment tax. You can calculate it on IRS Schedule SE and include the form with your tax return.

The good news is, your employer has already withheld payroll taxes for the income reported on your W-2 form. However, you’ll have to pay the self-employment tax on your self-employed income.

Paying Quarterly Taxes

You shouldn’t wait until the end of the year to pay your self-employment tax and income tax on your business income, or else you’ll owe interest and penalties. The IRS wants you to estimate your taxes and pay as you go, four times a year. You can complete IRS Form 1040-ES to estimate how much you’ll owe each quarter.

When you start your business or work as self-employed, you’ll have to make an educated guess about how much income you will earn over the tax year, because you won’t have any previous years’ income to guide you. If your estimate is wrong—either too low or too high—you can complete a second set of 1040-ES forms during the tax year and adjust your quarterly payments accordingly.

The important thing is that you begin making quarterly payments as soon as you start your business, or begin working as self-employed. They’re due on April 15, June 15, September 15, and January 15 of the following year.

Completing IRS Schedule C

Schedule C is used to calculate your overall business income for the portion of the year that you were self-employed—all the income your business took in, less business expenses. The resulting number is what you’ll use to calculate your self-employment tax on Schedule SE and what you’ll report on your Form 1040 as income. If your expenses were $5,000 or less, you can use Schedule C-EZ instead.

Reporting All Income

You must report all your sources of income to the IRS on your tax return, even if you don’t receive a 1099 form from your customers or employer. If you were close in estimating what you would owe when you completed Form 1040-ES and made those quarterly payments on time, you won’t owe the IRS much (if any) additional tax.

Always go back over your tax return to make sure you deducted every business expense you were entitled to. Look for differences between your estimated expenses at the time you completed Form 1040-ES and what they actually turned out to be. If you were wrong in your forecast for either income or expenses, you can adjust going forward into the new year.

Likewise, if the W-4 form you completed for your employer (which itemizes your dependents and other important information that influences the deductions from your paycheck) was accurate, you won’t owe anything on the income reported on your W-2, either.

Remember, with TurboTax, we’ll ask you simple questions about your income and expenses, and fill out the right tax forms for you to maximize your tax refund.

Perfect for independent contractors
and businesses

Find more tax deductions so you can keep more of the money you earn with TurboTax Self-Employed.

For only $114.99*
Start for Free

Looking for more information?

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.


Security is built into everything we do
Here's how
* Important Offer Details and Disclosures
  • TURBOTAX ONLINE/MOBILE

  • Try for Free/Pay When You File: TurboTax online and mobile pricing is based on your tax situation and varies by product. Absolute Zero $0 federal (1040EZ/1040A) + $0 state offer only available with TurboTax Federal Free Edition; offer may change or end at any time without notice. Actual prices are determined at the time of print or e-file and are subject to change without notice. Savings and price comparisons based on anticipated price increase expected in March. Special discount offers may not be valid for mobile in-app purchases.
  • QuickBooks Self-Employed Offer with TurboTax Self-Employed: File your 2016 TurboTax Self-Employed return between 4/19/17 and 10/16/17 to receive your complimentary subscription to QuickBooks Self-Employed until 10/31/18. Activation by 12/31/17 required. Sign in to QuickBooks Self-Employed via mobile app or at https://selfemployed.intuit.com/turbotax; e-mail address used for activation and sign-in. Offer valid only for new QuickBooks Self-Employed customers. See QuickBooks.com for price comparison.
    • When you use TurboTax Self-Employed to file your 2017 taxes, you will have the option to renew your QuickBooks Self-Employed subscription. If you do not purchase TurboTax Self-Employed by 10/15/18, you will have the option of renewing your QuickBooks Self-Employed subscription by 10/31/18 for another year at the then-current annual subscription rate. You may cancel your subscription at any time from within the QuickBooks Self-Employed billing section.
  • Pays for itself (TurboTax Self-Employed): Estimates based on deductible business expenses calculated at the self-employment tax income rate (15%) for tax year 2016. Actual results will vary based on your tax situation.
  • Anytime, anywhere: Internet access required; standard message and data rates apply to download and use mobile app.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice.
  • TurboTax Expert Help, Tax Advice and SmartLook: Included with Deluxe, Premier and Self-Employed (via phone or on-screen); not included with Federal Free Edition (but available for purchase with the Plus bundle). SmartLook on-screen help is available on a PC, laptop or the TurboTax mobile app. TurboTax experts provide general advice, customer service and product help; tax advice provided only by credentialed CPAs, enrolled agents and tax attorneys. Feature availability varies by device. State tax advice is free. Service, area of expertise, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice.
  • Tax Return Access, My Docs and My Analysis & Advice features: Access to all tax-related documents we have on file for you is available until you file your 2017 tax return or through 10/31/2018, whichever comes first. Terms and conditions may vary and are subject to change without notice.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2015 TurboTax products.
  • Most Popular: TurboTax Deluxe is our most popular product among TurboTax Online users with more complex tax situations.
  • CompleteCheck: Covered under the TurboTax accurate calculations and maximum refund guarantees.
  • #1 rated online tax prep provider: Based on independent comparison of the best online tax software by TopTenReviews.com March 13, 2017.
  • TURBOTAX CD/DOWNLOAD SOFTWARE

  • TurboTax CD/Download products: Price includes tax preparation and printing of federal tax returns and free federal e-file of up to 5 federal tax returns. Additional fees apply for e-filing state returns. E-file fees do not apply to New York state returns. Savings and price comparison based on anticipated price increase expected in March. Prices subject to change without notice.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice. This benefit is available with TurboTax Federal products except TurboTax Business.
  • About our TurboTax Product Experts: Customer service and product support vary by time of year.
  • About our credentialed tax experts: Live tax advice via phone is included with Premier and Home & Business; fees apply for Basic and Deluxe customers. State tax advice is free. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice. Not available for TurboTax Business customers.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2015 TurboTax products.
  • Data Import: Imports financial data from participating companies. Quicken and QuickBooks import not available with TurboTax installed on a Mac. Imports from Quicken (2015 and higher) and QuickBooks Desktop (2011 and higher); both Windows only. Quicken import not available for TurboTax Business. Quicken products provided by Quicken Inc., Quicken import subject to change.