A general introduction to how self-employment income is taxed, for freelancers, gig workers, and independent contractors.
As a self-employed individual, you generally report your business income and expenses on Schedule C, and you're taxed on the net profit — income minus deductible business expenses — not the raw amount you brought in. This is why keeping accurate expense records matters as much as tracking income.
When you work for an employer, they split Social Security and Medicare taxes with you. When you're self-employed, you generally cover both halves yourself through self-employment tax, currently a combined 15.3% on your net self-employment earnings, in addition to regular income tax. This is separate from — and in addition to — your income tax liability.
Because no employer is withholding tax from your pay, the IRS generally expects self-employed individuals who'll owe a meaningful amount to pay estimated tax four times a year rather than in one lump sum at filing time. Missing these payments can result in an underpayment penalty even if you pay everything owed by the filing deadline. Setting aside a percentage of each payment you receive — many self-employed people target roughly 25–30%, depending on their overall tax situation — makes these payments far less painful.
Without an employer's payroll and HR department keeping records for you, the responsibility for accurate, defensible records falls on you. See the Small-Business Financial Organization guide for practical habits that make this manageable.