Tax Tip Thursdays: How Self-Employed Taxpayers Can Stay Ahead of the IRS

Being self-employed gives you freedom over your schedule and income—but it also means the IRS sees you differently. You’re responsible for tracking your own income, paying your own taxes, and making sure you comply with all reporting requirements. If that sounds like a lot, don’t worry. Staying ahead of the IRS just takes a little preparation and the right habits.

1. Understand What the IRS Expects

As a self-employed individual, you’re expected to:

• Report all income, even if you don’t receive a 1099

• Pay self-employment tax (covering both Social Security and Medicare)

• Make estimated tax payments throughout the year

• Keep documentation that supports your income and deductions

This isn’t optional—the IRS expects you to treat your business activities seriously and to follow the same rules other business owners do.

2. Separate Business and Personal Finances

One of the first steps in getting organized is opening a dedicated business bank account and credit card. This helps you track your income and expenses without having to sort through your personal transactions. If you’re ever audited, this separation also makes it easier to prove your deductions were legitimate business costs.

3. Document All Income—Even If You Don’t Get a 1099

Think the IRS only wants to know about your 1099s? Think again. Whether you were paid by Zelle, Venmo (as a business), PayPal, in cash, or by check, it’s all taxable income. Don’t rely solely on the forms you receive—track every payment and report it honestly.

4. Deduct Only Legitimate Business Expenses

You’re allowed to deduct ordinary and necessary business expenses—but stretching those definitions can get you into trouble. Common self-employed deductions include:

• Office supplies and subscriptions

• Business use of your home (calculated properly)

• Advertising and website expenses

• Professional development and certifications

• Business meals (50% deductible if properly documented)

When in doubt, ask yourself: would this expense exist if I didn’t run this business? If the answer is no, it might not be deductible.

5. Pay Quarterly Estimated Taxes

If you expect to owe $1,000 or more in taxes for the year (after credits and prior withholdings), the IRS wants you to pay quarterly. These payments are typically due:

• April 15

• June 15

• September 15

• January 15 of the following year

Missing these deadlines—or underpaying—can lead to penalties. Many self-employed individuals set aside 25–30% of each payment they receive to cover taxes, including federal, state, and self-employment.

6. Use Tools to Simplify Your Workflow

You don’t need to manage everything with paper receipts and Excel spreadsheets. Cloud-based tools like QuickBooks, FreshBooks, and Wave can help you track your income, organize expenses, and prepare for tax time. Even basic apps that scan and categorize receipts can be helpful when you’re wearing multiple hats.

7. Work With a Tax Pro Who Knows Self-Employment

Tax laws change, and there are always new opportunities and risks for small business owners. A tax professional—especially one who specializes in working with self-employed individuals—can help you make the most of your deductions, avoid surprises, and plan ahead with confidence.

Final Thoughts

Being your own boss means you carry more responsibility—but it also gives you the chance to build something on your terms. With smart financial habits and a solid understanding of what the IRS expects, you can reduce your risk of audit and take control of your tax situation year-round. If you need assistance with preparing your tax returns, please reach out to info@mkhstaxgroup.com.