Do You Need a Registered Business?
No, you don’t. It should be explained that paid child care, home repairs, mowing lawns, fixing computers, writing articles or any other kind of occasional service is business activity. You do not need a registered business to carry on a business, that is, to be self-employed. In the United States, anyone can work for themselves as long as they use their own first and last name. Only if you want to operate under an assumed name (e.g., Kasia’s Pierogi) do you need to register that name, as I explain in the book “Otwieram biznes” (“Starting a Business”). With a registered business (sole proprietorship), you can get a tax ID number for it and open a business bank account.
Payers Report Your Income to the IRS
When you sell T-shirts on Zazzle or your handicrafts on Etsy, and your income in a given year exceeded $20,000 with more than 200 transactions, by January 31 of the following year the platform will send you a summary of your income on Form 1099-K. Likewise, a business client sends a contractor Form 1099-NEC if, in the course of its business, it paid him or her at least $2,000 during the year (since 2026; previously the threshold was $600). These forms are also sent to the IRS at the same time. Remember, however, that you must report the income whether or not you receive a form – otherwise the IRS will come after you for the taxes.
Do You Have to Report Cash?
Private individuals do not have to issue Form 1099-NEC. They pay the contractor the amount due, and that is the end of their obligations.
The form of payment does not matter: whether in cash, by personal check, cashier’s check, money order or credit card – payment for services is income that the law requires the service provider to report and pay the taxes due on.
How to File Your Taxes
Business income and expenses are reported on an attachment to the main tax form called Schedule C, Profit or Loss From Business. Expenses reduce income dollar for dollar, and if the year ended with a loss, you can deduct it from other income – from your own or your spouse’s wages. On net profits you pay income tax and Social Security contributions (calculated on Schedule SE), which will increase your future retirement benefit. Talk this over with your accountant or pick up the book “Jak oszczędzać na podatkach” (“How to Save on Taxes”).
The TurboTax program can help you prepare your own tax return.
Estimated Tax Payments
An employer withholds the taxes due for its employees, but a self-employed person has to do it on his or her own. If you send in too little tax, you may have to pay a penalty. Someone who earns extra money after hours can increase the tax withholdings at their job by filling out Form W-4 at work. You can also send in estimated tax payments yourself using Form 1040-ES (TurboTax will print it for you). You face no penalty if your tax underpayment is less than $1,000.
Social Security Contributions
The benefit of paying taxes is not only a clear conscience but also the fact that you earn credits toward Social Security retirement benefits. When filing taxes, a self-employed person also pays Social Security contributions, which amount to 15.3% of 92.35% of net income. They are calculated on an attachment called Schedule SE.
If, for example, you earned $10,000 net last year, your Social Security contribution comes to about $1,413, but half of that contribution is deductible from income, so in total you will pay less. Your income taxes will be small, or even zero, if you deposit the right amount into an IRA or SIMPLE IRA retirement account.
A note for wives of husbands with good incomes: if half of your husband’s future retirement benefit will be larger than your own benefit, then working additional Social Security quarters makes no difference. The reason is that you will get spousal benefits anyway, regardless of your earnings history. More in the book “Ubezpieczenie społeczne Social Security” (“Social Security”).
Expenses Are Deductible from Income
The law gives business owners (whether or not their business is registered) numerous tax deductions, which mean we will pay little in taxes, or perhaps none at all. It depends on the expenses incurred to earn the income and the deductions we are entitled to.
Business owners and self-employed people deduct the costs of doing business from their income. The obvious deductions are costs directly related to the business, such as materials, labor, advertising, transportation, equipment rental, services, tools, etc. Indirect costs can also be deducted, such as a computer, professional books and magazines, membership dues in professional associations, consultations with a lawyer or accountant, office supplies, postage stamps, professional courses, meals at which you discuss business, and many, many others. You can include the cost of a home office and travel. A self-employed person can deduct the cost of health insurance.
Shelter Money in Retirement Accounts for Business People
Self-employed people have several types of retirement plans available to them: SIMPLE IRA, Keogh and SEP. The most advantageous for a small business owner is the SIMPLE IRA, where by December 31 you can contribute up to $17,000 (in 2026) plus an additional $4,000 if you are over fifty ($5,250 at ages 60–63).
You can read more in the book on individual retirement plans, “Amerykańskie emerytury” (“American Pensions”).
Conclusions
A person who works for himself or herself in the United States does not have to deal with many formalities, and numerous deductions will help minimize income taxes or even avoid them entirely.
Updated October 2026.
