Understanding Self Employment and Income Tax Filing for Online Business and Gig Work

Hey guys! I'm a bit overwhelmed with filing taxes for the first time on my own. I run a small handmade jewelry shop on Etsy where I made about $8,950 in sales last year, plus I did some food delivery with UberEats that brought in around $3,800. So altogether my gross income was like $12,750 for 2023. I've been doing some research and saw the standard deduction is $13,850. Does this mean I don't owe any income tax since my total is under that amount? The part that's really confusing me is the self employment tax situation. Does that standard deduction apply to self employment taxes too, or is that a separate thing entirely? From what I can tell, I need to subtract all my business expenses (craft supplies, shipping materials, etc.) and the mileage deduction from UberEats driving to find my actual net profit. Then that net profit gets hit with the self employment tax, right? I feel like I'm missing something important here and don't want to mess this up! Any advice would be super appreciated!

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18 comments

Yara Khoury

•8M

You're on the right track! The standard deduction ($13,850 for 2023) does apply to your income tax calculation, so if your total income is below that, you won't owe federal income tax. However, you're correct about self-employment tax being different. The standard deduction does NOT apply to self-employment tax. You'll need to pay self-employment tax on your net profit (after expenses) if it's $400 or more. For your Etsy business and UberEats work, you'll need to complete Schedule C to calculate your net profit. Deduct all legitimate business expenses - materials, shipping costs, a portion of your internet if used for business, etc. For UberEats, track your mileage (the standard mileage rate for 2023 is 65.5 cents per mile) or actual vehicle expenses. Once you calculate your net profit on Schedule C, this amount goes on your 1040. If your net profit is $400 or more, you'll also need to complete Schedule SE to calculate your self-employment tax (about 15.3% of your net profit).

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Yara Khoury

•8M

Yes, if you expect to owe $1,000 or more in taxes for the year, you should generally make quarterly estimated tax payments. For someone just starting out, you might not have known this, so penalties might be reduced the first time. For next year, you can use Form 1040-ES to calculate and pay your quarterly taxes. Regarding home office deduction, yes, you can potentially claim this if you have a space in your home used exclusively and regularly for your business. You can use either the simplified method ($5 per square foot, up to 300 square feet) or the regular method (calculating actual expenses). Just make sure the space is used exclusively for business - not a multipurpose room.

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Paolo Longo

•8M

I was in a similar situation last year with my own small business! I found this amazing tool called taxr.ai (https://taxr.ai) that really helped me understand the self-employment tax situation. I was completely confused about what expenses I could legitimately deduct from my Etsy shop and how to handle the quarterly payments. The tool analyzed my situation and explained exactly how to handle my Schedule C and self-employment taxes. It even pointed out several deductions specific to my craft business that I had no idea about - saved me nearly $800! My favorite part was how it explained the difference between income tax (where your standard deduction applies) and self-employment tax (where it doesn't).

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Paolo Longo

•8M

You have the option to connect banking accounts or upload spreadsheets of your transactions, which makes the whole process so much easier! It automatically categorizes everything and identifies potential deductions, then you can review and adjust as needed. Saved me hours of sorting through receipts. The main difference from TurboTax or H&R Block is that it's specifically designed for self-employed people and small business owners. It focuses on maximizing deductions in those areas rather than being a general tax solution. In my experience, it caught several industry-specific deductions that TurboTax completely missed, especially around home office, inventory, and business development costs.

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Amina Bah

•8M

Just wanted to update that I tried taxr.ai after posting my question! It was seriously eye-opening. I had no idea I could deduct a portion of my internet bill, phone expenses, and even some software subscriptions I use for creating my product listings. The tool walked me through calculating my actual net profit and showed me that while I won't owe income tax because of the standard deduction, I did need to pay the self-employment tax on my profits above $400. It also set me up with a quarterly tax payment schedule for 2024 so I don't get hit with penalties next year. Honestly worth checking out if you're confused about self-employment taxes like I was!

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CosmicCowboy

•8M

If you need to actually talk to someone at the IRS about your self-employment tax questions (which I highly recommend for first-time filers), don't waste days trying to get through on their phone lines. I used this service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent in about 15 minutes when I was dealing with my own Etsy tax issues. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was skeptical at first, but after spending literally hours on hold trying to get clarification about my Schedule C deductions, I gave it a shot. The IRS agent I spoke with explained exactly how to handle my online marketplace income and which expenses were legitimately deductible. Totally changed my understanding of how self-employment taxes work.

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CosmicCowboy

•8M

It works by using an automated system that navigates the IRS phone tree and waits on hold for you. When an agent actually picks up, you get a call connecting you directly to them. No magic, just technology handling the waiting part. The "catch" is that it's a service that saves you time, not a free solution. But considering I wasted 3+ hours trying to get through on my own (twice!), the time savings was absolutely worth it. The IRS actually confirmed all my specific Etsy deduction questions and explained exactly how to handle my mileage for delivery driving, which prevented me from making some costly mistakes on my return.

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Javier Cruz

•8M

I need to eat my words. After posting that skeptical comment, I was still desperate to get answers about my self-employment taxes before the filing deadline, so I tried Claimyr. Honestly shocked that it actually worked. Got through to an IRS agent in about 20 minutes after spending DAYS trying on my own. The agent walked me through exactly how to handle my side hustle income and confirmed that while the standard deduction doesn't apply to self-employment tax, there are still ways to reduce the taxable amount through business expense deductions. They also explained how estimated quarterly payments work so I can avoid penalties next year. Saved me from making some pretty big mistakes on my Schedule C.

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Emma Thompson

•8M

I use QuickBooks Self-Employed now and it's been a lifesaver. You can connect your accounts and it automatically categorizes most transactions, plus you can snap photos of receipts and attach them to expenses. Absolutely separate your business and personal accounts! This was actually one of the red flags that triggered my audit - I was mixing personal and business expenses in one account. Open a separate checking account for your business transactions, even if it's just a free one. Makes tax time so much easier and looks more legitimate to the IRS.

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