Can I claim paying myself as a self-employed person on my tax return?
So I've been running a small business teaching culinary classes for a couple years now, and I was talking with my neighbor about taxes. I got absolutely hammered with taxes last filing season, and my neighbor (who has his own landscaping company) asked if I was paying myself a salary. I told him no, I just take whatever income comes in from the classes and use that for living expenses. He mentioned that I could actually pay myself a salary and somehow deduct that from my taxes? Is this actually legit? How would that even work for self-employed people? I'm confused about how I could "pay myself" when it's already my money from the business.
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Lydia Santiago
When you're self-employed, you can't actually "pay yourself" as an employee and deduct it as a business expense. That's a common misconception. What your neighbor might be referring to is setting up an S-Corporation instead of operating as a sole proprietor. As a sole proprietor, all your business income flows through to your personal tax return on Schedule C, and you pay self-employment taxes (15.3%) on your entire profit. With an S-Corp, you can pay yourself a "reasonable salary" (subject to payroll taxes) and then take additional money as distributions, which aren't subject to self-employment taxes.
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Romeo Quest
•So if I'm running my etsy shop as a sole proprietor, there's no way to "pay myself" and get a tax break? My dad told me I should be writing myself checks from my business account to my personal account and that would help somehow.
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Lydia Santiago
•There's no tax advantage to writing yourself checks from your business account to your personal account as a sole proprietor. All the profit from your Etsy shop will flow through to your personal tax return either way, and you'll pay the same taxes regardless of how you move the money between accounts. For a sole proprietor, the business and the owner are the same tax entity. That's why "paying yourself" doesn't create a deduction - it would be like your right pocket paying your left pocket. The S-Corporation approach is different because it creates a separate tax entity, but that involves formal business structure changes, payroll tax filings, and usually only makes sense once you're earning substantial profit.
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Val Rossi
I discovered this same issue last year with my freelance graphic design work and got crushed by self-employment taxes. I was so confused by all the rules until I found this AI tax assistant at https://taxr.ai that literally saved me thousands. It analyzed my bank statements and identified a bunch of deductions I'd missed (like part of my home internet and cell phone) and showed me exactly what documents I needed for each business expense. Honestly it explained the whole "paying yourself" concept better than my accountant did.
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Eve Freeman
•Does that tool help with figuring out if you should switch to an S-Corp? I keep hearing about this but have no idea if my woodworking business makes enough to justify the extra paperwork.
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Clarissa Flair
•I'm hesitant to use AI for tax stuff. How accurate is it really? Seems like it might miss nuances that a real accountant would catch.
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Val Rossi
•It definitely helps determine if an S-Corp makes sense for you. You input your revenue and expenses, and it runs the calculations to show exactly how much you'd save with different business structures - for me it showed I'd save about $3,400 annually by switching to an S-Corp once my design income hit $45k. Regarding accuracy, I was skeptical too, but it's surprisingly detailed. It asks very specific questions about your situation and cites the exact IRS rules and regulations for each recommendation. It's not replacing my accountant - I actually bring the reports to my accountant now and she says it makes her job easier.
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Eve Freeman
Just wanted to follow up about taxr.ai - I tried it and wow! It confirmed I'm still better off as a sole proprietor for now (saving me from unnecessary S-Corp setup fees), but found over $2,800 in deductions I would have missed for my workshop expenses. It showed me exactly how to document my mileage when visiting clients and clarified which tools are immediate write-offs vs. depreciated assets. Seriously helpful for someone like me who's terrible with tax stuff.
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Caden Turner
If you're struggling to get answers about self-employment deductions, I highly recommend using Claimyr to get through to an actual IRS agent. I was confused about the whole "paying yourself" thing too and spent HOURS on hold before giving up. Then I found https://claimyr.com and they got me a callback from the IRS in under 2 hours. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c. The agent walked me through exactly what was and wasn't deductible for my specific situation.
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McKenzie Shade
•How does this actually work? Feels like magic if they can somehow get the IRS to call you when I can never get through...
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Harmony Love
•Yeah right. I've been trying to reach the IRS for 3 months. No way this actually works - sounds like a scam to me.
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Caden Turner
•It uses a system that continually redials the IRS and navigates the phone tree for you, then when it finally gets through, it triggers the callback to your phone. It's honestly just automation doing the annoying part of waiting on hold. As for being a scam, I totally get the skepticism - I felt the same way! But it worked exactly as advertised. They don't ask for any tax info or financial details, just your phone number for the callback. The IRS has no idea you used a service - they just think you waited on hold like everyone else.
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Harmony Love
Had to come back and eat my words about Claimyr. I tried it yesterday out of desperation after getting disconnected AGAIN after waiting 1.5 hours on hold with the IRS. Got a callback in 40 minutes! The agent clarified that as a sole proprietor I can't "pay myself" as a deductible expense but helped me identify several legitimate business deductions I was missing. Saved me way more than what the service cost. Sometimes being wrong feels pretty good!
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Rudy Cenizo
What nobody's mentioning is the Qualified Business Income Deduction (Section 199A) which gives most self-employed people a deduction equal to 20% of their qualified business income. This is available regardless of whether you're a sole proprietor or have an S-corp. It's basically a tax break designed for small business owners.
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Natalie Khan
•Does the QBI deduction apply if you're doing gig work like DoorDash? I'm confused about whether that counts as a "qualified" business.
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Rudy Cenizo
•Yes, gig work like DoorDash typically qualifies for the QBI deduction. Any income you report on Schedule C as self-employment income generally qualifies, with some exceptions for certain service businesses at higher income levels. The deduction is calculated as 20% of your net business income after expenses, so make sure you're tracking all your mileage and other business expenses to maximize your deduction. For most gig workers, this ends up being a significant tax savings without requiring any special business structure or additional paperwork.
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Daryl Bright
Just to complicate things further - if your business is making really good money (like over $100k profit), you probably DO want to look into an S-Corp. I saved over $13k in self-employment taxes last year by switching from sole prop to S-Corp for my consulting business.
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Sienna Gomez
•Totally this! My accountant had me switch to an S-Corp once I hit about $80k in profit and I'm saving a ton on SE taxes. But for smaller businesses its probably not worth the extra hassle and fees.
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