Quick answer: If you earn money on your own, whether freelancing, consulting, driving, or selling online, you owe regular federal and New York income tax plus self-employment tax for Social Security and Medicare, because no employer is withholding or paying its share. You report the income and your business expenses on Schedule C, and you generally need to make quarterly estimated payments to avoid penalties. All of the income is taxable whether or not you receive a 1099.
Side income has become ordinary. Plenty of our Central New York clients have a regular job plus a weekend business, or have left the W-2 world entirely. The tax rules are not complicated, but they do require you to act during the year instead of waiting until April.
What taxes do self-employed people actually owe?
There are two layers:
- Income tax. Your net profit is added to your other income and taxed at your normal federal and New York rates.
- Self-employment tax. This is the self-employed version of the Social Security and Medicare taxes that employers split with employees. You pay both halves, a combined 15.3 percent on most net earnings. The Social Security portion stops at an annual wage base that the Social Security Administration adjusts each year, while the Medicare portion has no cap, and higher earners owe an additional Medicare tax on top.
You get to deduct half of your self-employment tax when computing income tax, which softens the blow slightly. The IRS has a good overview on its Self-Employed Individuals Tax Center.
One New York note: if you live or work in New York City or the downstate counties served by the MTA, you may also owe the Metropolitan Commuter Transportation Mobility Tax on self-employment earnings. That does not apply in Syracuse or anywhere else in Central New York.
Do I owe tax if I did not get a 1099?
Yes. A Form 1099-NEC or 1099-K is just an information return. The reporting thresholds that trigger those forms have changed several times in recent years, and many small payments never generate a form at all. The obligation to report comes from earning the money, not from receiving paperwork.
We see people get into trouble when they report only what appears on their 1099s. Keep your own record of every payment received, including cash, checks, Venmo, PayPal, and platform payouts, and reconcile it against any forms that arrive.
What can I deduct?
You can deduct ordinary and necessary expenses of your business. Common ones include:
- Vehicle costs, using either the IRS standard mileage rate or actual expenses, for business miles only
- Supplies, equipment, software, and phone and internet in proportion to business use
- A home office, if a space is used regularly and exclusively for the business
- Platform fees, commissions, and payment processing fees
- Health insurance premiums, if you are not eligible for an employer plan through your own or a spouse's job
- Retirement contributions to a SEP-IRA or solo 401(k), which can be substantial
Self-employed people may also qualify for the qualified business income deduction, which lets many owners deduct a portion of their net business income. It has income limits and special rules for service businesses, so check eligibility each year.
Ride-share and delivery drivers should pay special attention to mileage. A contemporaneous log, even a simple app, is what holds up if the IRS asks. Our article on business deductions owners miss covers more of these.
How do quarterly estimated payments work?
Because nothing is withheld, the IRS expects you to pay as you go. Federal estimated payments are generally due in mid-April, mid-June, mid-September, and mid-January of the following year. New York uses the same schedule.
You can generally avoid an underpayment penalty if your withholding and estimated payments cover either 90 percent of this year's tax or 100 percent of last year's tax, rising to 110 percent of last year's tax if your adjusted gross income was above a set threshold. Paying based on last year's tax is the simplest safe harbor when your income is growing.
If you also have a W-2 job, another option is to increase withholding at that job to cover the side income. Withholding is treated as paid evenly through the year, which can fix a shortfall even late in the year. You can pay federal estimates through IRS Direct Pay and New York estimates through your Online Services account.
How do I stay ahead instead of scrambling?
A few habits make all the difference:
- Open a separate bank account for business income and expenses. It makes bookkeeping and an audit far easier.
- Set aside a percentage of every payment for taxes in a savings account. Many self-employed people use somewhere between a quarter and a third, but your number depends on your bracket.
- Track expenses monthly, not in a panic in March.
- Calendar the four estimate dates and pay from the set-aside account.
- Review mid-year. If income jumped, adjust your remaining payments.
If you are hiring help or thinking about forming an LLC or S corporation, read our guide to choosing a business entity first.
Frequently asked questions
Is there a minimum amount of self-employment income before I owe tax?
Self-employment tax generally applies once your net earnings from self-employment reach $400 for the year. Income tax applies to any amount, though whether you must file depends on your total income. In practice, if you have meaningful side income, plan on filing and paying.
Can I deduct my car if I use it for both personal and gig driving?
Yes, but only the business portion. You can use the standard mileage rate times your business miles, or actual expenses multiplied by your business-use percentage. Either way, you need a mileage log that shows dates, purposes, and miles.
What happens if I miss a quarterly payment?
The IRS and New York charge an underpayment penalty that works like interest on the amount that was late, for the time it was late. It is not catastrophic, but it adds up. Make the payment as soon as you can, and consider raising the next ones to catch up.
Do I need an LLC to be self-employed?
No. You are a sole proprietor by default as soon as you start doing business on your own. An LLC can offer liability protection, but by itself it does not change your federal income tax unless you elect a different tax treatment.
This article is general information for 2026, not tax or legal advice for your situation. Tax rules and figures change; confirm current amounts with the IRS, New York State, or your accountant before acting.
Related service: Personal Tax Preparation & Planning