Introduction — “I got paid. Now what?”

Clients, marketplaces, or payment apps paid you—great. The hard part is reporting it correctly so you’re compliant and not overpaying. This guide shows exactly how to report self-employment income, which forms to expect (1099-NEC/1099-K), how Schedule C and Schedule SE fit together, when to make estimated tax payments, and what records to keep.

At the individual level, owners generally report business results on Schedule C (Form 1040); use Schedule SE for self-employment tax; and include all income—even if no information form arrives. IRS

1) First things first: is it a business (not a hobby)?

An activity is a business when you pursue it for income or profit with continuity and regularity. If it’s a hobby, losses can’t offset other income. The IRS lists factors to help you decide (profit intent, how you operate, expertise, etc.). IRS+2IRS+2

Texas note: Texas has no personal income tax, but these federal rules still apply to Texans.

2) Where do I report my income?

  • Schedule C (Form 1040) — Report gross receipts, returns/allowances, and ordinary/necessary business expenses; result flows to your Form 1040. IRS
  • Schedule SE — Computes self-employment tax (Social Security/Medicare) on net earnings from self-employment. IRS
  • Information returns you might receive:
    • Form 1099-NEC (nonemployee compensation from clients). IRS+1
    • Form 1099-K (payment apps/marketplaces). Thresholds are $5,000 for 2024, $2,500 for 2025, and $600 for 2026+; report income whether or not you receive a form. IRS+2IRS+2

Pro move: Reconcile your books (sales by channel) to any 1099s. 1099s often exclude cash/check sales or include gross amounts before platform fees.

3) How to report self-employment income

  1. Pick your accounting method (cash or accrual) and be consistent. Cash recognizes income when received and expenses when paid; accrual recognizes when earned/incurred. IRS+1
  2. Enter gross receipts on Schedule C; back out returns/allowances; subtract ordinary/necessary expenses. See Publication 334 for the small-business overview. IRS+1
  3. Compute SE tax on Schedule SE for your net earnings from self-employment. IRS
  4. Include all channels: direct invoices, payment apps (1099-K), marketplaces, subscriptions, and barter (FMV). If you received value, it’s income. IRS

4) Estimated taxes: when to pay (so April isn’t painful)

If you expect to owe tax that isn’t covered by withholding, use Form 1040-ES to figure and pay quarterly estimated tax. For 2025 calendar-year filers, due dates are April 15, June 16, Sept. 15, 2025, and Jan. 15, 2026 (adjusts for weekends/holidays). IRS+1

Tip: The IRS “pay-as-you-go” system lets you re-figure each quarter if your income changes. IRS

5) Recordkeeping that actually protects you

You must keep records long enough to substantiate the income and deductions on your return. Keep a clear summary of transactions (books) plus supporting documents (invoices, 1099s, receipts, bank/processor statements). General retention guidance and examples are on IRS.gov. IRS+2IRS+2

6) Common pitfalls (and quick fixes)

  • Mismatches vs. 1099s. If a form reports gross but your books reflect net after fees, show fees as expenses—don’t reduce gross receipts off-book. IRS
  • Hobby treatment. If you lack a profit motive (or treat it like a hobby), you can’t use losses to offset other income. Consider formalizing operations and documentation. IRS
  • Mixing methods. Once you choose cash or accrual, be consistent (changes require IRS approval in many cases). IRS

Quick owner’s checklist

  • Business, not hobby? (Profit motive factors). IRS
  • All channels included (invoices, apps, marketplaces, barter)? IRS
  • Schedule C complete; Schedule SE computed? IRS+1
  • 1099-NEC/1099-K reconciled to your books? IRS+1
  • Estimated taxes planned with 1040-ES? IRS
  • Records organized and retained? IRS

Most thresholds and dollar amounts (e.g., standard deduction) are inflation-indexed annually—verify current-year numbers before filing. Publication 334 consolidates many owner rules. IRS

Want a pro to sanity-check your reporting flow and quarterly plan? Book a 15-minute consult with Finpilot360—we’ll align your Schedule C, 1099s, and 1040-ES in one session.

Sources:

  • Schedule C (Form 1040) — purpose and who files. IRS
  • Publication 334 — small-business guide (income, expenses, credits). IRS+1
  • Schedule SE / SE tax — overview and instructions. IRS
  • 1099-NEC — nonemployee compensation; reporting overview. IRS+1
  • 1099-K thresholds — 2024 $5k; 2025 $2.5k; 2026+ $600; report income regardless. IRS+2IRS+2
  • Hobby vs business — factors & limitations. IRS+1
  • Accounting methods — cash vs accrual. IRS+1
  • Estimated tax (Form 1040-ES) — due dates & overview. IRS+1
  • Recordkeeping — what to keep and how long. IRS+1