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1099 taxes are one of the most confusing things for freelancers, gig workers, and those who are self-employed. From my personal experience as a CPA who has worked with thousands of self-employed professionals, the reason many 1099 workers struggle with taxes is that they don’t receive proper guidance.
Most don’t even know the rules on how much to withhold and often end up overpaying. Others simply don’t understand how write-offs work, what they can and cannot deduct, which is the most important part of lowering their tax bill.
So, I’m creating this guide to break down everything you need to know as someone who works on 1099 income for the year 2025. I’ll cover how much you need to set aside for taxes, how to pay quarterly taxes, and how to maximize your deductions, because the end goal is to pay the lowest taxes possible. As a CPA, that’s my goal in this guide.
1099 is the name of the tax form you receive when you work as a freelancer or self-employed person. It can be from another company or an individual. It basically means you work for yourself. Formally, you are known as an “independent contractor” to the IRS. This is the term the IRS uses to describe people who receive a 1099-NEC or 1099-K from a company or an individual.
There are different types of 1099 forms:
The important note here is that the 1099-K threshold is now $2,500 for 2025, down from $20,000/200 transactions in prior years. This means many more self-employed individuals will be receiving a 1099-K than before.
As someone like myself, who is a CPA and has worked with thousands of self-employed individuals, I’ve seen my fair share of people who are always surprised by large tax bills during tax season. What’s worse is that they usually don’t have all that money ready, and so they delay paying, which only adds more penalties and interest.
For example, I was working with a client who is a realtor. They had a really good year, got over $100,000 of income, but had no idea they had to make quarterly tax payments. They also had no idea they needed to keep track of their write-offs. By the time tax season came, we were scrambling to help, but it wasn’t a pleasant result because their tax bill was quite high.
2025 is especially important because:
For 2025, it’s especially important to stay on top of your records because the 1099-K threshold is only $2,500. This means even someone who sells items casually as a hobby online will now receive a form and have to report that income. Before, when the threshold was $20,000, most people didn’t have to worry about reporting small amounts or keeping track of minor deductions. Now, everything needs to be tracked, no matter how small.
But the key takeaway is planning. You don’t want to be surprised with a big tax bill. It’s better to pay slowly throughout the year. Once you spend your money, it’s gone. But if you make smaller payments over time, you won’t feel the pain of one large bill all at once.
When you’re self-employed, you pay three types of taxes:
For Social Security tax, the maximum income subject to tax is $176,100 for 2025.
For example, states like Florida, Texas, Nevada, New Hampshire, South Dakota, Tennessee, Alaska, Washington, and Wyoming don’t have an income tax. But states like California and New York do and at higher rates. So you need to check if you will have to pay state taxes or not.
Here’s the process:
Example:
On $51,000 net profit, you’ll pay about:
That totals 25–35%.
As a rule of thumb, set aside 30% of your income for taxes. This percentage may be lower if you maximize your deductions.
Quarterly tax due dates are:
You can pay online through the IRS Direct Pay system, either from your bank account or with a credit card. Always make sure you’re on the official IRS website ending in .gov. If you choose to pay by card, the IRS will redirect you to approved third-party processors (make sure to follow the links from irs.gov).
To avoid penalties, remember the Safe Harbor rule:
Most states also have similar rules for their own estimated taxes.
Some of the most overlooked deductions include:
Example: Aram is an Uber driver. He uses his car 80% for work. If his car payment is $1,000 per month, $800 can be deducted, plus gas, insurance, and tolls.
On average, I see 1099 workers miss out on $5,000–$8,000 in deductions per year because they don’t track them properly.
As a CPA, here’s the system I recommend:
Track your income: This means more than just waiting for your 1099 at the end of the year. You need to know how much you’re earning throughout the year, and you should keep your own records to compare with the forms you receive.
Track your deductions: This is the most important part. You want to use software that automates it for you, and Tabby is perfect for this.
Estimate your taxes: Remember, you have to pay them quarterly. Use the percentage rule of thumb (around 30% of net income) to stay on track.
Pay quarterly: Even if you don’t pay in every single quarter, you should pay something in the quarters where you do have profit. This avoids penalties.
Be ready for tax season with proper records: Collect all the 1099s from every source, and make sure you have a complete income and expense summary. With Tabby connected to your bank and credit cards, you won’t miss deductions.
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The best way to stay on top of your deductions is by using bookkeeping software. I recommend Tabby because it:
Uncovers overlooked financial gaps so you can plug leaks and keep more of what you earn
Automatically identifies deductible expenses to maximize your savings come tax season.
Get instant, easy-to-read financial snapshots to guide smart business decisions
AI sorts transactions into the right categories instantly- no manual tagging required.
Stay on top of commissions, mileage, and listing expenses, without the paperwork.
Lindsey, Realtor
Simplify your finances and keep every tax deduction in check while you run your business.
Amanda, E-com Owner
Track client income and project expenses in one place, stress-free and tax-ready.
Mia, Graphic Designer
Capture every trip, task, and tip with automated tracking that maximizes your earnings.
Tina, Gig Worker
A 1099 is the tax form you receive when you work for yourself. You can get it from a company or an individual. Keep in mind the different types of 1099 forms: 1099-K, 1099-NEC, and 1099-MISC.
Yes. Many of the fees you pay to run your real estate business—such as MLS fees, license renewals, advertising, and professional dues—are deductible business expenses. Tabby makes it easy to keep records so you don’t miss any write-offs.
Most realtors are independent contractors and receive a 1099 form. You’ll need to:
Report your income and business expenses on Schedule C (Form 1040).
Pay self-employment taxes using Schedule SE.
Make quarterly estimated tax payments to avoid penalties.
Tabby prepares tax-ready reports so you can file confidently—or hand everything off to your CPA with zero stress.
Tabby uses AI to automatically sort and categorize your transactions. You link your credit card and bank accounts (even personal accounts), and it finds deductions for you. Tabby prepares you for tax season by providing a complete tax report.
Yes! Tabby can import up to 18 months of past transactions (depending on your bank). If your bank doesn’t support the full history, you can upload statements directly into Tabby to fill the gap.
Tabby is designed by Ahad Ali, a seasoned CPA with over 12 years of experience helping thousands of self-employed professionals stay tax-ready and financially organized. His deep industry knowledge powers the smart automation behind Tabby – so you can trust your books are in good hands.
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