Quick overview

If you earn money from gigs — rideshare driving, freelancing, selling on marketplaces, or contract services — the IRS treats that income as self-employment. That changes which forms you file and which expenses you can claim. This guide explains the core forms, common deductions, recordkeeping best practices, and practical filing tips I use with clients to keep audits and surprises to a minimum.

Author note: In my practice advising independent contractors and small gig businesses, the biggest mistakes I see are weak recordkeeping and ignoring estimated taxes. Correcting those two things often saves clients time and money.

Which forms do gig workers commonly use?

  • Form 1099-NEC: Platforms or clients generally issue this for nonemployee compensation if they paid you $600 or more in the year. Even if you don’t receive a 1099, you must report all taxable income. (IRS: Gig Economy Tax Center)

  • Schedule C (Form 1040): Use Schedule C to report gross receipts, subtract allowable business expenses, and calculate net profit or loss from self-employment. (IRS Publication 334 and Schedule C instructions)

  • Schedule SE (Form 1040): Calculates self-employment tax (Social Security and Medicare) on net earnings from self-employment. You also claim one-half of self-employment tax as an adjustment to income on Form 1040. (IRS: Self-Employment Tax)

  • Form 1040-ES: Estimated tax vouchers and worksheets for calculating and making quarterly estimated tax payments if you expect to owe at tax time.

  • Form 1040: Your individual income tax return combines wage income, self-employment results, credits, and other items to determine overall tax owed or refund.

Note: Depending on your business structure (LLC taxed as partnership or S corp), you may receive K-1s or file corporate returns. When in doubt, consult a tax advisor.

Sources: IRS – Gig Economy Tax Center; IRS – Self-Employment Tax; IRS – Estimated Taxes (Form 1040-ES).

Which deductions are most valuable for gig workers?

  • Business expenses (Schedule C): Ordinary and necessary expenses directly related to earning income. Typical examples: advertising, supplies, software subscriptions, tools, continuing education, and platform fees. (IRS Publication 535)

  • Home office deduction: If you use a space in your home exclusively and regularly for business, you can claim either the simplified method (a flat $5 per square foot, up to 300 sq ft) or actual-expense method (a percentage of mortgage interest, rent, utilities, insurance, and repairs). Keep clear documentation and use IRS rules to determine eligibility. See our in-depth guide on home-office rules for side hustles. (See: home office deduction rules)

  • Vehicle expenses: Choose the standard mileage deduction or actual-expense method. Track business miles carefully with a mileage log or an app (date, start/stop odometer, purpose). If you use the actual-expense method, keep receipts for gas, repairs, insurance, and depreciation.

  • Supplies and equipment: Computers, phones, software subscriptions, and tools used for your gig are deductible if used for business. If an item is also used personally (like a laptop), you must prorate the business percentage.

  • Insurance and retirement: Business liability insurance and contributions to SEP-IRAs, SIMPLE IRAs, or solo 401(k)s lower taxable income and help save for retirement.

  • Health insurance deduction: Self-employed taxpayers may be able to deduct premiums paid for medical and dental insurance for themselves and family as an adjustment to income, subject to qualifying rules.

Refer to IRS Publication 535 for a deeper list and limits on business expense deductions.

How self-employment tax works (in practice)

Self-employment tax covers Social Security and Medicare. The tax is computed on Schedule SE using your net self-employment income. Generally:

  • You pay both the employer and employee portions of Social Security and Medicare, which together equal the self-employment tax.
  • You may deduct one-half of this self-employment tax as an adjustment to income on Form 1040.

Because the Social Security portion applies only up to the annual wage base (which the IRS adjusts yearly), high earners should monitor how much of their income is subject to that portion. The Medicare portion has no wage base limit, and high earners may owe an additional 0.9% Medicare surtax on earned income above threshold amounts.

For more on calculations and planning, see our self-employment tax guide.

Internal resource: Self-Employment Tax: Calculating SE Tax and Deductions (https://finhelp.io/glossary/self-employment-taxes-calculating-se-tax-and-deductions/)

Practical, step-by-step filing checklist

  1. Collect income records: 1099s, bank deposits, and platform statements. Reconcile platform reports with your own books.
  2. Separate business and personal finances: a dedicated checking account and card makes deductions and audits easier.
  3. Track expenses in real time: record receipts, mileage, and invoices. Use an app (QuickBooks, Expensify, or a specialized mileage tracker) and back up digital copies.
  4. Choose deduction methods intentionally: e.g., for vehicles choose standard mileage or actual expenses and stick with that method for the year.
  5. Calculate estimated taxes: use Form 1040-ES and pay quarterly if you expect to owe $1,000 or more after withholdings.
  6. File Schedule C and Schedule SE with Form 1040, and attach any required forms or worksheets.
  7. Keep records: retain tax records and supporting documentation for at least three years; keep more if you underreported income.

Internal resource: How to calculate and pay estimated taxes for gig income (https://finhelp.io/glossary/how-to-calculate-and-pay-estimated-taxes-for-gig-income/)

Recordkeeping and audit preparedness

  • Maintain a mileage log (date, miles, purpose) and retain receipts for major purchases.
  • Save platform statements and copies of 1099s, even when amounts are small.
  • Document business-use percentages for mixed-use assets (e.g., laptop or home office) and calculate prorated deductions clearly.

If audited, the IRS looks first for consistency and supporting documents. Well-organized records reduce stress and roughly double your odds of a favorable, quick resolution.

For details about home office documentation and common pitfalls, see our home-office deduction resources. (Home Office Deduction: Rules for Remote Workers — https://finhelp.io/glossary/home-office-deduction-rules-for-remote-workers/)

Common mistakes and how to avoid them

  • Missing income: Report all income, even amounts not reported on a 1099. The IRS receives copies of many third-party reports too, so omission can trigger notices.
  • Poor mileage documentation: Use an app or a bound logbook. Vague notes invite disallowance.
  • Mixing personal and business expenses: Keep separate accounts and document business purpose for mixed charges.
  • Forgetting estimated taxes: Underpayment penalties can be avoided using safe-harbor rules (paying 100% of prior year tax or 110% for higher-income taxpayers, or 90% of current-year tax). See IRS Form 1040-ES guidance.

Strategic tax tips I recommend

  • Track income by client or platform. That makes 1099 reconciliation simple.
  • Consider retirement contributions (SEP IRA or solo 401(k)) to lower taxable income while saving for retirement.
  • If your net profit is high and you’d like to lower self-employment tax exposure, discuss entity options (S corporation election) with a CPA — but weigh setup and compliance costs.
  • Review state tax rules: state filing and estimated tax requirements vary.

Sources and further reading

Professional disclaimer

This article is for educational purposes and does not constitute tax advice. Tax rules change and individual circumstances vary; consult a qualified tax professional for guidance tailored to your situation.