US Small Business & Self-Employment Tax Guide

Navigating the US tax system is one of the most critical aspects of running a solo business or LLC. Unlike employees, self-employed individuals must manage both income taxes and self-employment taxes (which fund Social Security and Medicare). Knowing your obligations helps you avoid IRS penalties and maximize your write-offs.

Understanding Self-Employment Tax & Form 1040-ES

If your net self-employment earnings exceed $400, you are generally subject to the self-employment tax (currently 15.3%). Key tax tasks include:

• Quarterly Estimated Payments: Since there is no employer withholding, the IRS expects you to pay estimated taxes four times a year using Form 1040-ES.
• Schedule C (Form 1040): Used to calculate net profit or loss from your sole proprietorship business.

Maximizing Legal Deductions

You can legally reduce your taxable profit by deducting ordinary and necessary business expenses. Common deductions include the Home Office Deduction (calculating square footage dedicated to work), standard business mileage rates, and capital gains adjustments for business investments.