Tips for Self Employed Clients

Key Tips & Reminders for Schedule C Filers: Staying Compliant and Organized for 2025

As the 2025 tax season approaches, it’s essential for sole proprietors, independent contractors, and gig workers to prepare for accurate and efficient Schedule C filing. Below are practical tips and reminders to help you stay compliant, maximize deductions, and avoid common pitfalls.

1. Understand Who Must File Schedule C

• Who files? If you operated a business or practiced a profession as a sole proprietor, or received self-employment income (including gig work), you must generally file Schedule C (Form 1040) to report your business income and expenses.

• Thresholds: If your net earnings from self-employment are $400 or more, you must also file Schedule SE to calculate self-employment tax (Social Security and Medicare) 

2. The Critical Role of Contemporaneous Record Keeping

• What is it? Contemporaneous record keeping means documenting income and expenses at or near the time they occur, rather than reconstructing them later.

Why it matters:

• Accuracy: Timely records are more reliable and reduce the risk of errors or omissions.

• Audit defense: Well-organized, timely records are your best defense if the IRS examines your return.

• Substantiation: The IRS requires you to substantiate deductions with adequate records—receipts, logs, invoices, and electronic records all count, as long as they are organized and legible.

Best practices:

• Use a dedicated business bank account.

• Keep digital or paper copies of receipts.

• Maintain a log or use accounting software to track income and expenses.

• For vehicle, travel, and meal expenses, keep mileage logs and note the business purpose.

3. Common Deductible Expenses

• Must be ordinary and necessary: Only expenses that are both ordinary (common in your trade) and necessary (helpful and appropriate) are deductible.

Examples:

• Supplies, advertising, insurance, professional fees, and a portion of home office expenses (if you qualify).

• Legal and professional fees directly related to your business.

• Business portion of utilities, rent, and certain taxes.

• Home office: Deduct only the business-use portion, and keep records to substantiate the exclusive and regular use requirement.

4. Estimated Taxes and Self-Employment Tax

• No withholding: Unlike employees, self-employed individuals usually have no tax withheld. You may need to make quarterly estimated tax payments to avoid penalties.

• Self-employment tax: Schedule SE calculates Social Security and Medicare taxes on your net earnings ① ⑭.

5. Organizational Tips

• File by category and year: Organize receipts and statements by type (income, expenses, assets) and tax year.

• Update regularly: Set aside time each week or month to update your records and reconcile accounts.

• Backup: Store digital records securely and back them up regularly ② ⑤.

Final Reminders

• Start early: Don’t wait until tax season to organize your records.

• Stay informed: Tax law changes (including OBBB) may affect your deductions or reporting requirements for 2025.

• Ask for help: If you have questions feel free to contact me..