You are the business

If you earn $400 or more from self-employment in a year, the IRS considers you a sole proprietor. You report income and expenses on Schedule C, and the profit flows onto your 1040.

Self-employment tax (the surprise)

When you have a job, your employer pays half of Social Security and Medicare taxes and you pay half through payroll. When you're self-employed, you pay both halves: 15.3% on top of regular income tax. This is the number that shocks new freelancers.

Good news: you get to deduct half of the SE tax as an adjustment to income.

Quarterly estimated taxes

Because no one is withholding tax for you, the IRS wants payments four times a year:

• Q1: April 15
• Q2: June 15
• Q3: September 15
• Q4: January 15 of the following year

A safe rule of thumb: set aside 25–30% of every payment you receive into a separate savings account for taxes.

Deductions freelancers miss

• Home office — a portion of rent, utilities, and internet if you have a dedicated workspace.
• Mileage — business miles at the IRS standard rate. Track them in real time.
• Software & subscriptions — the tools you use to do the work.
• Health insurance — self-employed health insurance deduction if you're not eligible through a spouse.
• Retirement — SEP-IRA and Solo 401(k) contributions can shelter big chunks of income.

Recordkeeping in real life

Open a separate bank account for business income and expenses. Snap photos of receipts as they happen. A messy shoebox in April is where deductions go to die.