Self-employed handymen generally owe income tax plus self-employment tax, and often pay estimated taxes quarterly. Keep clean records, separate business and personal money, and confirm current rates, deadlines and deductions at irs.gov or with a CPA, because the figures change.
Self-employment tax
When you work for yourself you generally pay both the employer and employee share of Social Security and Medicare taxes. Check the current rate and any limits at irs.gov. Set money aside from every payment so April does not surprise you.
Quarterly estimated payments
If you expect to owe tax, you generally need to make estimated payments during the year. Look up the due dates and the safe-harbor rules at irs.gov (search "estimated taxes"), and ask your CPA how much to pay.
Common deductible expenses
- Vehicle: mileage or actual costs. Confirm the current standard mileage rate at irs.gov and keep a log.
- Tools and equipment: some may be deducted immediately, others depreciated. Ask your CPA.
- Insurance: business liability and related policies.
- Home office: only if it meets IRS requirements.
- Phone, internet and software: the business-use portion.
- Supplies and materials: items used on jobs.
Tracking is covered in the hidden cost of not tracking expenses.
1099 vs W-2
If you pay subcontractors, you may need to issue Form 1099s. Collect a W-9 before the first payment and check the current thresholds at irs.gov. For classification see subcontractors vs employees.
Find a CPA who knows trades
Ask other contractors for referrals. A good CPA will save more than they cost. Read more in handyman business taxes. HandyBook offers revenue, profit and tax reports and, on Business, 1099 prep; see expense tracking.
FAQ
Do handymen pay self-employment tax?
Generally yes, if you are self-employed and your net earnings exceed the IRS threshold. Check current rules at irs.gov.
When are quarterly taxes due?
Dates are published by the IRS each year. Look up the current schedule at irs.gov.
What can a handyman deduct?
Ordinary and necessary business expenses such as tools, supplies, insurance and vehicle costs, subject to IRS rules. Confirm with a CPA.
Do I need to send 1099s?
Possibly, if you pay contractors above the IRS reporting threshold. Confirm the current rule and collect W-9s.