How To File Self-Employment Taxes as a Small Business Owner

Owning your own business, freelancing, or diving into the world of side hustles offers flexibility and opportunity, but it also comes with unique responsibilities—particularly around taxes. Unlike traditional employees who have taxes withheld by their employers, self-employed individuals must manage their own tax obligations, which includes planning for quarterly payments.

Whether you’re a seasoned entrepreneur or just beginning your business journey, mastering the ins and outs of self-employment taxes is essential for long-term success. For military families living abroad, understanding tax obligations can be especially complicated.

Keep reading to learn how self-employment taxes work and how Armed Forces Bank can support you in managing your financial responsibilities.

What Are Self-Employment Taxes?

Besides your regular federal (and potentially state) income taxes—which you are also expected to estimate and pay throughout the year—you are also responsible for self-employment taxes.

Self-employment taxes go toward Social Security and Medicare. For salaried/wage employees, these taxes are automatically split between the worker and the employer. However, self-employed individuals are responsible for both portions, which equals 15.3% of net earnings. This breaks down into 12.4% for Social Security and 2.9% for Medicare.

The IRS expects all of these taxes to be paid throughout the year via quarterly estimated payments.

It’s important to note that anyone earning $400 or more annually from self-employment must pay these taxes. This includes gig workers, freelancers, independent contractors, and small business owners—whether you’re delivering food or groceries, running an online shop, or managing a network marketing business.

Staying on Top of Quarterly Tax Payments

Paying quarterly taxes ensures you stay current with the IRS and avoid penalties for underpayment. Missing these deadlines can lead to added costs and stress. Therefore, rather than waiting until April to deal with taxes, quarterly payments spread the responsibility throughout the year.

If you’re new to quarterly taxes, the deadlines are consistent each year: Q1 is due on April 15, Q2 is due on June 15, Q3 is due on September 15, and Q4 is due on January 15 of the following year.

Keep in mind that military families stationed outside the U.S. or Puerto Rico automatically qualify for a two-month extension to file their taxes. While this doesn’t extend the deadline for making quarterly payments, it does provide additional time to file your return, making it a helpful tool for those managing the complexities of deployment or frequent moves.

To determine how much to pay each quarter, start by estimating your annual income. If you’ve filed taxes in the past, you can use last year’s return as a guide! Tools like IRS Form 1040-ES include worksheets to help calculate your quarterly payments. Setting aside a percentage of each payment or project you complete can also ensure funds are available when payments are due.

For those who didn’t make any estimated payments in 2024, it’s a good idea to consult a tax professional for guidance and start planning now for 2025. Taking a proactive approach can help you avoid penalties and maintain financial stability.

Tax Deductions to Help Reduce Your Liability

One major benefit of self-employment is the ability to reduce taxable income through deductions. Tracking and claiming legitimate business expenses not only helps lower your tax bill but also provides a clearer picture of your financial health.

Some common deductions include:

• Home office expenses if you use part of your home exclusively for business.
• Business-related equipment and supplies, such as laptops, software, or inventory.
• Travel costs for client meetings or work-related trips.
• Marketing and advertising expenses, including website hosting and social media campaigns.

By keeping detailed records of your expenses throughout the year, you’ll be prepared to claim deductions accurately. Whether you use a digital tracking tool or organize receipts manually, staying consistent is key.

Armed Forces Bank Has Financial Solutions for Military Families

Military families managing self-employment face unique challenges, from frequent relocations to working abroad while juggling tax obligations. Armed Forces Bank understands these challenges and provides specialized financial tools to simplify tax planning and business management.

For example, maintaining a separate business bank account with Armed Forces Bank can make tracking income and expenses easier throughout the year. This financial organization not only reduces stress during tax season but also helps with budgeting and forecasting. Additionally, our cash management tools can assist you in setting aside funds for quarterly tax payments, ensuring you’re prepared when deadlines approach.

Prepare for Tax Season With Confidence

Being self-employed requires a proactive approach to managing taxes and financial responsibilities, but the benefits of being your own boss are well worth it. By staying organized, paying taxes on time, and leveraging deductions, you can keep your business running smoothly and avoid unnecessary stress.

Armed Forces Bank is proud to support military members and their families who run their own businesses, work as freelancers, or explore side hustles. Our tailored financial solutions can help you take control of your finances, so you can focus on your business goals. Visit us online or stop by a branch to learn more about how we can help simplify your financial journey.

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