If you earned even $400 of net self-employment income in 2025, the IRS requires you to file Schedule C (Profit or Loss From Business) along with your Form 1040. Here is a practical, ordered checklist to assemble the entire self-employed package before you sit down to file.
Step 1 — Gather all your 2025 income
- All Form 1099-NEC from clients who paid you $600+ for non-employee compensation.
- All Form 1099-K from PayPal, Stripe, Square, Etsy, Venmo Business, etc.
- All Form 1099-MISC (rents, royalties, prizes).
- Your own records of cash and check payments that did NOT trigger a 1099 (still 100% taxable).
- A January-to-December bank statement total of business deposits.
- Refunds, credits, returns, and chargebacks to subtract.
Line 1 of Schedule C is gross receipts or sales — your total before any expenses.
Step 2 — Cost of Goods Sold (if you sell physical products)
If you sell products (e-commerce, crafts, retail), fill Part III of Schedule C:
- Beginning inventory January 1, 2025.
- Purchases during the year (less anything taken for personal use).
- Cost of labor (excluding amounts paid to yourself).
- Materials and supplies.
- Other costs (e.g., freight in).
- Ending inventory December 31, 2025.
If you only sell services, leave Part III blank.
Step 3 — Business expenses (Schedule C lines 8–27)
These are the 19 IRS-defined categories. Have receipts or bank statements for every dollar:
| Line | Category | Common examples |
|---|---|---|
| 8 | Advertising | Google Ads, Facebook Ads, business cards |
| 9 | Car and truck | Standard mileage 2025: $0.70/mi |
| 10 | Commissions and fees | Affiliate, referral fees |
| 11 | Contract labor | 1099 paid to other freelancers |
| 12 | Depletion | Resource extraction (rare) |
| 13 | Depreciation / Section 179 | Equipment over $2,500 useful life |
| 14 | Employee benefit programs | Health, retirement (not for you) |
| 15 | Insurance (other than health) | Liability, E&O, business property |
| 16 | Interest | Business loan, business credit card |
| 17 | Legal and professional | Attorney, CPA, bookkeeping |
| 18 | Office expense | Postage, office supplies |
| 19 | Pension and profit-sharing | SEP-IRA, Solo 401(k) for employees |
| 20 | Rent | Office rent, equipment rent |
| 21 | Repairs and maintenance | Equipment service |
| 22 | Supplies | Job-specific consumables |
| 23 | Taxes and licenses | Business license, payroll taxes |
| 24a | Travel | Airfare, hotels, ground transport |
| 24b | Meals | 50% deductible on most business meals |
| 25 | Utilities | Business-only utilities, business phone |
| 26 | Wages | W-2 employees |
| 27a | Other expenses | Software subscriptions, bank fees, education |
Line 30 = home office deduction (see the dedicated home office article).
Step 4 — Schedule SE: self-employment tax
Net profit (Schedule C line 31) flows to Schedule SE:
SE tax = Net profit × 92.35% × 15.3%
The 15.3% breaks down to 12.4% Social Security (on the first $176,100 of combined wages + SE income for 2025) plus 2.9% Medicare (no cap). High earners (above $200K single / $250K MFJ) owe an additional 0.9% Additional Medicare Tax.
Half of your SE tax is deductible as an above-the-line adjustment on Schedule 1, line 15.
Step 5 — Retirement contributions (still deductible until April 15, 2026)
- SEP-IRA: up to 25% of net SE earnings, max $70,000 for 2025.
- Solo 401(k): $23,500 employee + 25% employer = up to $70,000 ($77,500 with catch-up if 50+).
- Traditional IRA: $7,000 ($8,000 if 50+).
- HSA (if high-deductible health plan): $4,300 self-only or $8,550 family.
Contributions reduce both income tax and (for some plans) self-employment tax.
Step 6 — QBI deduction (the 20% bonus)
The Qualified Business Income deduction lets most self-employed filers deduct up to 20% of net business income as an additional adjustment, with no extra paperwork beyond Form 8995 (simplified) or 8995-A.
2025 income thresholds for the full 20%:
- Single / HoH: taxable income up to $197,300
- MFJ: taxable income up to $394,600
Above those thresholds, "specified service trades" (consulting, law, health, accounting, financial services, etc.) start to phase out. Below them, almost every Schedule C filer claims the full 20%.
For Carlos the Uber driver earning $33,120 net, QBI takes another $6,624 off his federal taxable income — a 22% bracket savings of $1,457.
Step 7 — Quarterly estimated payments for 2026
Use Form 1040-ES to estimate four quarterly payments based on your 2025 results. Safe-harbor rule: pay either:
- 90% of expected 2026 tax, OR
- 100% of 2025 total tax (110% if AGI > $150K)
Whichever is smaller. Set calendar reminders for April 15, June 15, September 15, and January 15 next year.
Step 8 — Records to keep (and for how long)
- Three years minimum from the filing date.
- Six years if you omitted more than 25% of gross income (IRS audit window).
- Seven years for bad debts or worthless securities.
- Forever for asset purchase receipts (basis records for depreciation).
A simple cloud folder organized by year and Schedule C line number is enough.
How USA Taxes handles Schedule C
The Self-Employed plan walks you through this exact checklist — imports your 1099-NEC and 1099-K totals, applies the 2025 mileage rate, calculates Schedule SE automatically, computes QBI, generates four 1040-ES vouchers, and includes a CPA review before you pay to download. Everything for $129 per return, with no subscription.
Educational only. Specific situations (S-corp election, multi-member LLC, mid-year business changes) often justify a CPA conversation.