Introduction

If you run a business or side-hustle, your small business tax filing requirements hinge on two things: the $400 self-employment threshold and your filing status. Choose right, and you keep more cash and credits; choose wrong, and you risk penalties or overpaying. The IRS requires a tax return when net self-employment earnings reach $400 or more, and the amount subject to SE tax is generally 92.35% of your net earnings. IRS+1

This 2025 guide covers filing triggers, status choices (Single, MFJ, MFS, HOH, QSS), and what changed with 1099-K. Where 2024 numbers still matter, we flag them—and remember, these amounts are inflation-indexed every year. IRS

Who must file? (Owner edition)

1) The $400 self-employment rule
If your net self-employment earnings are $400+, you must file a return and compute self-employment tax on Schedule SE. The base for SE tax is usually 92.35% of your net SE earnings. IRS

2) The standard-deduction test (2024 vs 2025)
Even if you don’t hit $400, you generally must file when gross income ≥ your standard deduction for your status.

  • 2025 standard deduction: $15,000 (Single/MFS), $30,000 (MFJ/QSS), $22,500 (HOH). IRS
  • 2024 standard deduction (for 2024 returns): $14,600 / $29,200 / $21,900. IRS
    These figures are inflation-adjusted annually by the IRS. IRS

3) Platform payments & 1099-K (phase-in)
For payments processed by apps/marketplaces (PayPal, Etsy, etc.), IRS reporting is phasing in: $5,000 for 2024, $2,500 for 2025, and $600 for 2026+. You must report taxable income even if no form arrives. IRS+1

(State angle: Texas has no personal income tax, so these are purely federal rules. If you live in a state with income tax, filing status can also affect state results—Texas example shows where it doesn’t.)

Filing status—how to pick the right one

Your filing status drives your standard deduction, rates, and credit access. The five statuses are Single, Married Filing Jointly (MFJ), Married Filing Separately (MFS), Head of Household (HOH), and Qualifying Surviving Spouse (QSS). IRS+1

Single

Unmarried and don’t qualify for HOH or QSS.

Married Filing Jointly (MFJ)

Often the lowest overall tax for couples and broadest access to credits; you report combined income and deductions. See Pub. 501 for details. IRS

Married Filing Separately (MFS) — proceed with caution

  • If one spouse itemizes, the other must itemize; the non-itemizing spouse can’t take the standard deduction. IRS+1
  • Several credits are limited or barred for MFS (e.g., many education credits). Check the specific credit rules before choosing MFS. IRS

Head of Household (HOH)

Usually better than Single if you’re unmarried (or considered unmarried), pay more than half the cost of keeping up a home, and have a qualifying person. IRS

Qualifying Surviving Spouse (QSS)

For two years after the year of a spouse’s death if you have a dependent child; you use the MFJ standard deduction and rates. IRS

Quick scenarios for small-business owners

  • Side-hustle + W-2 (unmarried): If you meet HOH tests (cost of home + qualifying person), HOH often beats Single. IRS
  • Married owner: Compare MFJ vs MFS; MFJ usually preserves more credits and the larger standard deduction. IRS
  • Separated but not divorced: Some credits (like EITC) have special separated-spouse provisions; verify before choosing MFS. IRS
  • Recently widowed: Consider QSS if you have a dependent child; it can apply for two years after the year of death. IRS
  • Selling online: Expect a 1099-K if you cross the year’s threshold; report income either way. IRS

A simple decision path (bookmark this)

  1. Did net SE earnings reach $400+? → Yes: you must file and compute SE tax (Schedule SE). IRS
  2. If not, compare gross income to your status-based standard deduction (2025: $15k/$30k/$22.5k). → At or above? File. IRS
  3. Choosing a status:
    • MFJ usually best for married owners.
    • MFS can shield liability but restricts credits and may force both spouses to itemize. IRS
    • HOH/QSS can meaningfully improve outcomes when you qualify. IRS
  4. Using payment apps? Track totals. $5k (2024) → $2.5k (2025) → $600 (2026) reporting thresholds for 1099-K. IRS+1

Key takeaways

  • $400 in net self-employment earnings triggers filing and SE tax; the SE base is typically 92.35% of net earnings. IRS
  • Standard deductions (indexed annually): 2025 $15k / $30k / $22.5k; 2024 $14.6k / $29.2k / $21.9k. IRS+1
  • MFS has strict downsides (itemize-if-spouse-itemizes + credit limits). IRS
  • 1099-K thresholds are phasing in: $5k (2024), $2.5k (2025), $600 (2026+)—report income whether or not you receive a form. IRS

Want a pro to sanity-check your filing status and thresholds? Book a 15-minute consultation with Finpilot360. We’ll map your 2025 plan now so there are no April surprises.

Sources:

  • IRS Topic No. 554 — Self-employment tax (threshold + 92.35%). IRS
  • Schedule SE Instructions (2024) — who must pay SE tax. IRS
  • IRS news releases (inflation adjustments): 2025 and 2024 standard deductions. IRS+1
  • Filing status overview & Pub. 501 (HOH, QSS, MFS). IRS+1
  • Topic No. 501 & FAQs — MFS itemization rule. IRS+1
  • 1099-K phased thresholds — IRS Notice/FAQs page + “Understanding your 1099-K.” IRS+1