Can anyone PLEASE explain how self employment taxes work for dummies? I'm so confused!
So I've been doing some side gigs and I'm completely lost about self employment taxes. Everywhere I read it says if you make under $400 as a self employed person you don't have to pay taxes. But I'm super confused - is that $400 a month? $400 a year? $400 per client? I'm seriously frustrated that none of this was ever taught in high school. I'm 23 now and feel completely clueless about how to handle money as an adult. I've been doing some digital art commissions and dog walking on weekends, but I have no idea what I'm supposed to report or pay taxes on. Can someone break this down super simple for me? I feel like a complete idiot asking this but I'd rather look dumb now than mess up my taxes later.
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Andre Moreau
The $400 rule refers to your net self-employment earnings for the entire year. If you make more than $400 in net profit from self-employment during the tax year, you need to pay self-employment taxes. Here's a super simple breakdown: 1. Self-employment tax is basically Social Security and Medicare taxes for people who work for themselves 2. You calculate your "net profit" by taking all the money you earned from self-employment and subtracting your business expenses 3. If that net profit is $400 or more for the year, you need to pay self-employment tax 4. The self-employment tax rate is about 15.3% of your net profit Don't feel bad for asking! The tax system is confusing for everyone at first, and you're smart to learn about it now rather than getting surprised later.
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Zoe Stavros
•Ok so if I made like $2,000 from my etsy shop but spent $1,700 on supplies, that means my "net profit" is only $300 so I don't need to pay the self employment tax? Do I still need to file a tax return though?
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Andre Moreau
•In your example, if you made $2,000 and had legitimate business expenses of $1,700, your net profit would be $300. Since that's below the $400 threshold, you wouldn't owe self-employment tax. You might still need to file a tax return for other reasons though, like if you had other income from a regular job, or if you're eligible for refundable tax credits. Generally, single filers under 65 need to file if their gross income is at least $12,950 (for 2025 filing).
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Jamal Harris
After spending hours trying to figure out my taxes as a freelance photographer, I stumbled on this amazing tool called taxr.ai (https://taxr.ai) that literally saved my sanity. It analyzes your situation and explains exactly what you need to know about self-employment taxes in super simple terms. I was in the same boat as you - totally confused about the $400 threshold, quarterly payments, and what expenses I could deduct. This thing broke it all down and even helped me understand which forms I needed to file. It's like having a tax expert walk you through everything without the complicated jargon.
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Mei Chen
•Does it actually help figure out what counts as a "business expense"? That's where I get stuck every year. Like, can I deduct my internet if I work from home sometimes? Or the coffee I buy when I meet clients?
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Liam Sullivan
•Sounds like an ad tbh. Does it actually show you how to fill out the Schedule C and all those other forms? I tried TurboTax last year and still ended up confused.
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Jamal Harris
•It absolutely helps identify legitimate business expenses. The tool has a specific feature where you can list potential expenses and it explains what percentage is deductible and why. For home internet, it typically explains the partial deduction rules based on business usage percentage. For client meetings, it clarifies which meal expenses qualify under current rules. For the Schedule C, yes it does walk you through the form step by step, much better than my experience with TurboTax. It explains each line in plain language and provides examples that actually make sense. It's not just explaining the form but helping you understand the reasoning behind what goes where.
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Liam Sullivan
Ok I took the plunge and tried taxr.ai after seeing it mentioned here. Not gonna lie, I was skeptical but I'm actually impressed! It explained self-employment taxes WAY better than any YouTube video I'd watched. I've been selling custom jewelry on the side and was totally confused about how to track my expenses vs income. The tool broke down exactly what my tax obligations are and helped me understand which of my supply purchases counted as deductions. Best part was the explanation of estimated quarterly payments - turns out I should have been doing those, but now I know how to catch up!
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Amara Okafor
If you're struggling to get answers about self-employment taxes, don't waste hours on hold with the IRS like I did. I tried for THREE DAYS to get through to ask about my situation as a new freelancer. Then I found Claimyr (https://claimyr.com) and it was a game changer. I was able to actually speak with an IRS agent who explained everything about self-employment taxes, deductions, and estimated payments. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they wait on hold for you and call when an agent is ready. Saved me hours of frustration and I finally got clear answers about what I needed to file as a self-employed person.
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CosmicCommander
•Wait, how does this actually work? Do you have to give them personal info? Seems sketchy to have someone else calling the IRS for you.
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Giovanni Colombo
•Yeah right... The IRS never picks up no matter what. I've been trying for weeks to get someone to explain my self-employment situation. I'll believe this works when I see it.
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Amara Okafor
•The way it works is pretty straightforward - you provide your phone number and they use a system that holds your place in the IRS queue. When they're about to connect with an agent, they call your phone and connect you directly. You only speak with the actual IRS representative, not with any middleman. No, it doesn't require giving them sensitive personal information like your SSN or tax details. You only share what you're comfortable with, typically just your phone number so they can call you when an agent is ready. They're just holding your place in line, and when an actual IRS agent picks up, you're the one who talks to them directly.
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Giovanni Colombo
I'm back and need to eat my words. After my skeptical comment, I decided to try Claimyr out of desperation. I was shocked when I actually got through to a real IRS person in about an hour without having to sit by my phone the whole time. The agent walked me through the self-employment tax calculation and confirmed that the $400 threshold is for the entire year's net profit. They also explained how to handle my situation where I have a full-time job plus side gig income. Definitely worth it for the peace of mind knowing I'm doing things right instead of stressing about an audit.
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Fatima Al-Qasimi
Something nobody mentioned yet - if you have a regular W-2 job AND self-employment income, you still need to report the self-employment income even if it's under $400. The $400 threshold is just for paying the self-employment tax (Social Security/Medicare), but you still pay income tax on all your earnings. I learned this the hard way when I got a letter from the IRS about unreported income from a small web design project I did.
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QuantumQuester
•Wait seriously? So even if I only make like $200 from dog walking, I still need to report it? Does that mean I need all those complicated self employment forms too or just report it as extra income somewhere? This is exactly the kind of detail that confuses me.
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Fatima Al-Qasimi
•Yes, you still need to report it, but it's not as complicated as it sounds. You'll need to fill out a Schedule C to report your business income and expenses, but it's pretty straightforward for a simple side gig like dog walking. You won't need to pay the self-employment tax (the Social Security and Medicare portion) if your net profit is under $400, but you'll still include that income on your regular 1040 form and potentially pay income tax on it depending on your overall tax situation. Many tax software programs will walk you through this pretty easily.
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Dylan Cooper
Jumping in to add something important - keep GOOD RECORDS of your self-employment income and expenses! I've been self-employed for 3 years and the biggest thing that saved me was creating a simple spreadsheet from day one. Log every payment you receive and every expense related to your work. Take photos of receipts. If you use your car for business, track miles. It's so much easier to do this as you go than to try reconstructing everything at tax time.
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Sofia Ramirez
•What kind of expenses can I actually deduct? I do graphic design from my apartment. Can I deduct part of my rent? Internet? My computer? How do you calculate all that?
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