Independent Contractor Taxes: A 2025 Guide

Businesses don’t withhold taxes from independent contractors’ paychecks. So, if you’re self-employed, you need to figure out what to pay — and by when.

Deadlines are pretty consistent. Federal and self-employment taxes are usually due by April 15. Most independent contractors will pay estimated taxes each quarter, too.

But determining how much to pay can be trickier. This varies by individual. We usually recommend finding a small-business tax advisor to double-check your calculations (or even do them for you).

Here’s what independent contractors should know about filing their taxes.

An independent contractor is a self-employed individual who provides services to clients for a fee. Examples could include lawyers, accountants and others who do freelance work, like consulting or designing.

An independent contractor isn’t the employee of any business. This means their clients can control the result of their work, but not how they do the work, according to the IRS.

“Independent contractor” isn’t an official tax classification. The IRS taxes most independent contractors as sole proprietorships by default.

Independent contractors can choose to establish limited liability companies (LLCs) or S corporations instead. But you’ll need to file paperwork ahead of tax time to do this. See our guide on LLC taxes if you already opted to be treated as an LLC.

The main differences come down to tax forms and tax-withholding responsibilities.

Employees get W-2s each year from their employer. These forms detail how much they made and how much their employer withheld for taxes. In other words, employees aren’t responsible for calculating their own withholdings. Employers typically do it for them.

Independent contractors, on the other hand, receive Form 1099-MISC or Form 1099-NEC from each client who paid them $600 or more that year. These forms show how much they made, but don’t include tax withholdings. In this case, calculating those withholdings is up to the independent contractor.

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Since the IRS treats independent contractors as sole proprietorships by default, we’ll focus on those tax deadlines. Here’s a quick overview:

• Federal income tax: File Schedule C (Form 1040) by April 15 to report your annual income. 

• Self-employment tax: File Schedule SE (Form 1040) by April 15 to report your Social Security and Medicare taxes. 

• Estimated tax payments: Make these quarterly (April 15, June 15, Sept. 15 and Jan. 15) if you expect to owe more than $1,000 in federal taxes (including self-employment taxes).

• State and local tax: Requirements differ from state to state, and payment schedules may change depending on how much you owe. Your state’s tax department website will have more details.

Deadlines can differ if you're not a sole proprietorship or didn't start your fiscal year on Jan. 1. The latter is uncommon for sole proprietors. See our complete list of business tax deadlines for details.

Yes. If you’d like to request a tax extension, file Form 4868. This will change your filing deadline to Oct. 15 (or six months out from your original deadline).

However, your payment deadlines will stay the same. Here’s more about getting a tax-filing extension.

Most independent contractors will file an Individual Tax Return, or Form 1040. Beyond that, here are the tax forms to know, including ones you’ll use for informational purposes.

Schedule C

Independent contractors and other self-employed individuals use Schedule C, Profit or Loss from Business, to report their business income and expenses. You attach Schedule C to your Form 1040.

Schedule SE

Independent contractors that made $400 or more during their fiscal year need to file Schedule SE, Self-Employment Tax, alongside Form 1040. You pay these taxes in addition to income tax.

The current self-employment tax rate is 12.4% for Social Security and 2.9% for Medicare — a total of 15.3%. You apply that rate to 92.35% of your net earnings.

Independent contractors can deduct half of their self-employment tax amount from their taxable income. This can decrease your taxable income, but the self-employment tax itself is still a big expense.

State and local tax forms

Independent contractors may also need to pay state and local income tax. As of 2025, 42 states collect their own income tax, according to the Tax Foundation.

Independent contractors that sell taxable goods or services may need to pay sales tax to their state and/or locality, too.

Payment rules and tax rates vary from state to state. You can check your state’s tax department website for more details.

Form 1099

Independent contractors use Form 1099 for informational purposes and usually don’t need to file them with the IRS. However, they are responsible for reporting the income from Form 1099 on their Schedule C (Form 1040) each year.

W-9

Clients may ask independent contractors to fill out a W-9. This passes along the independent contractor’s tax identification number (TIN) and helps the client accurately fill out Form 1099 at the end of the year.

Independent contractors that expect to owe the IRS at least $1,000 in taxes at the end of the year should file quarterly estimated tax payments.

The IRS has multiple worksheets that help you calculate your estimated tax amount. You can also try dividing your previous year’s taxes by four.

Each quarter, you’ll pay your estimated taxes by mailing Form 1040-ES or paying online, over the phone or via the IRS2Go app.

Business deductions reduce independent contractors’ taxable income. You’ll report these on your Schedule C.

Here’s a handful of common deductions to look into:

• Home office: This deduction applies to independent contractors who primarily work out of their home office and use that space mostly for work purposes. You can deduct $5 per square foot (up to $1,500) or calculate deductions based on the percentage of the house your office occupies. 

• Mileage: The IRS lets you deduct 70 cents for each mile driven for work purposes.  

• Education: Independent contractors pursuing work-related education may be able to deduct these expenses from their taxable income. 

• Qualified business income: This can allow you to deduct up to 20% of your business income.

• Startup costs: If your independent contractor business is new, you might be able to deduct up to $5,000 in startup expenses for things like registration fees and market research. 

• Business meals and travel: Independent contractors who travel for work may be able to deduct a portion of their travel expenses. This includes deducting up to 50% of business meal expenses while traveling. 

See our overview of self-employment tax deductions for more options.

Let’s say you’re an independent contractor working with two companies. These are your only jobs, and you’re not an employee anywhere else. Here’s how you would go about calculating your taxes.

1. Total your income

You should receive a 1099 from each company confirming how much they paid you during the year. Combined, this is $70,000. You’ll include this income on Part 1 of your Schedule C.

2. Deduct your expenses

You work from a qualified home office, which is 200 square feet. Using the simplified method, you can deduct $5 per square foot. Your home office deduction is $1,000.

You also drove 600 miles during the year for some required assignments. That means you can take a deduction of $420 (using the IRS deduction of 70 cents per mile).

This brings your taxable income down to $68,580 (70,000 - 1,000 - 420).

3. Determine your self-employment deduction

Using Schedule SE, calculate the following:

• 92.35% of your taxable income, which is $63,333.63 (68,580 * 0.9235).

• 15.3% of that amount, which is $9,690 (63,333.33 * 0.153).

You can deduct half of this tax ($4,845) from your taxable income on Form 1040. That brings your final taxable income amount to $63,735.

Now that you’ve completed your Schedule C and Schedule SE, you have the income and deduction information you need to finish filing your 1040 personal tax return.