A sole proprietor files one return: Form 1040 with Schedule C, which reports business income and expenses and ends in a net profit or loss, and Schedule SE, which figures self-employment tax. There is no separate business return. You have to file if your net earnings from self-employment were $400 or more (IRS Publication 334). Calendar-year filers face the usual April 15 due date, which for tax year 2026 falls in 2027, and the fourth estimated payment for 2026 is due January 15, 2027.
What you file, and what each form does
| Form | What it does |
|---|---|
| Form 1040 | Your individual return. The net profit or loss from Schedule C is entered on Schedule 1, which feeds into it |
| Schedule C | Reports income or loss from a business you operated or a profession you practiced as a sole proprietor |
| Schedule SE | Figures Social Security and Medicare tax on your self-employment income. The math is in the self-employment tax guide |
| Form 1040-ES | Estimated tax payments during the year, because nobody withholds tax from you |
| Form 4868 | An automatic six-month extension to file. It does not extend the time to pay |
| Form 2210 | Figures the penalty if you underpaid estimated tax. See missed estimated tax payments |
Sources: IRS self-employed individuals tax center and Publication 334 (2025).
Do you have to file a return?
Yes, if net earnings from self-employment were $400 or more. The Schedule SE instructions use the same test: you must file that schedule when its line 4c is $400 or more (IRS). The $400 is measured on net earnings, after expenses, not on sales. Below $400, other filing rules in the Form 1040 instructions can still require a return, so check them.
Three points trip people up:
- The activity has to be a business. The Schedule C instructions say an activity qualifies if your primary purpose is income or profit, and that hobbies and sporadic activities do not (IRS).
- A loss still goes on Schedule C. The instructions warn that a loss on line 31 may be subject to a business loss limitation, figured on Form 461.
- Side income counts. Part-time, temporary and cash income are all reportable, whether or not you get an information form.
Deadlines for tax year 2026
| What | Date | Notes |
|---|---|---|
| Estimated payments for tax year 2026 | April 15, June 15 and September 15, 2026, then January 15, 2027 | You can skip the January payment if you file your 2026 return by February 1, 2027 and pay the whole balance with it |
| Filing your 2026 return | April 15, 2027 for calendar-year filers, if the usual rule holds | If the 15th lands on a weekend or legal holiday, the due date moves to the next business day |
| Extension to file (Form 4868) | Six months, to October 15, 2027, if the usual rule holds | File Form 4868 by the original due date. You still owe the tax by April |
The estimated payment dates come from the 2026 Form 1040-ES. For the return, the IRS's When to file page lists April 15 for calendar-year individuals (April 15, 2026 for the tax year 2025 return) and the six-month extension. Applying the same rule gives April 15, 2027 for tax year 2026, but the IRS announces each season's date, so confirm it at irs.gov before you plan around it. Many states have their own income tax and their own deadlines, and the SBA says tax laws vary by location and business structure.
From records to return: step by step
- Add up gross receipts for the calendar year. Line 1 of Schedule C asks for gross receipts from your trade or business. Use deposits, invoices and payment-app reports. Result: one income number.
- Match it against information forms. If the total in box 1 of your Forms 1099-NEC is more than what you report on line 1, the instructions say to attach a statement explaining the difference. A payment app or marketplace sends a Form 1099-K when you receive more than $20,000 in more than 200 transactions in a year, but you can receive one below that, and you must report all income whether or not you get one (IRS). Gifts and repayments from friends and family are not taxable income.
- Sort expenses by category and attach a record to each. For purchases and other expenses the IRS wants documents that show the payee, amount, proof of payment, date and a description, such as card statements, canceled checks and invoices.
- Split mixed costs. A vehicle used for business and personal trips must be divided. The standard mileage rate was 70 cents per mile for 2025, and the rate changes by year. Business meals are generally 50% deductible, and you still need records of time, place and business purpose. The simplified home office method covers up to 300 square feet used regularly and exclusively for business.
- Figure net profit on Schedule C. Income minus expenses. Result: the number that goes to Schedule 1 and into Form 1040.
- Complete Schedule SE. If line 4c is $400 or more you owe self-employment tax. For 2025 the Social Security part applies to the first $176,100 of self-employment income, and the limit changes every year.
- File and pay. Submit Form 1040 with both schedules and pay any balance by the original due date, even if you ask for an extension. Keep a copy of the return.
Two Schedule C lines are easy to get wrong. Line B wants a six-digit business code, and the NAICS code guide shows how to pick it. Line D is for an EIN: leave it blank if you have none, and do not enter your Social Security number there.
Records to keep and for how long
The IRS says to keep the records that support an item of income, a deduction or a credit until the period of limitations for that return expires. In practice, that means these periods (IRS):
| Situation | Keep records for |
|---|---|
| Most returns | 3 years |
| You left out income that is more than 25% of the gross income on your return | 6 years |
| You claim a bad debt deduction or a loss from worthless securities | 7 years |
| Employment tax records | At least 4 years after the tax is due or paid, whichever is later |
| You did not file, or filed a fraudulent return | Indefinitely |
Property and equipment records are kept until the limitations period ends for the year you dispose of the asset, because you need them to figure depreciation and gain or loss. The IRS lets you choose any recordkeeping system that clearly shows income and expenses, and a dedicated business bank account is the easiest source for the entries.
Mistakes that cost sole proprietors money
- Leaving out income because no form arrived. The IRS is explicit that you report income whether or not you receive a Form 1099-K.
- Counting personal money as sales, or the reverse. Friends' repayments are not income. A mixed account makes this hard to untangle.
- Deducting personal costs. The IRS says personal, living or family expenses are generally not deductible.
- Having only a list of expenses. IRS training material for preparers tells them to confirm that the taxpayer has documents to back up each amount, because the taxpayer must support income and expenses if the return is examined.
- Skipping Schedule SE. Self-employment tax is separate from income tax, and the $400 test applies to it.
- Treating an extension as more time to pay. It extends the filing date only.
- Not filing because you cannot pay. File anyway and ask about a payment plan.
The figures marked 2025 come from the IRS instructions for that year, the latest final versions reviewed on October 31, 2026. The IRS updates them every year, so check the instructions for the year you file. Consider a tax professional if your income is high, irregular or involves employees.
Frequently asked questions
What forms does a sole proprietor file?
Form 1040 with Schedule C to report business income and expenses, and Schedule SE to figure self-employment tax. Estimated payments are made with Form 1040-ES during the year.
When are sole proprietor taxes due?
For calendar-year filers the return is due April 15, moved to the next business day if it falls on a weekend or holiday. Estimated payments for tax year 2026 are due April 15, June 15 and September 15, 2026 and January 15, 2027.
Do I have to file if I made less than $400?
The $400 rule applies to net earnings from self-employment. Below it, other filing requirements in the Form 1040 instructions can still apply, so check them.
How long should a sole proprietor keep tax records?
Generally 3 years from filing, but 6 years if you left out more than 25% of your gross income, 7 years for bad debt or worthless securities deductions, and indefinitely if you did not file. Employment tax records need at least 4 years.
Sources: IRS: Instructions for Schedule C (Form 1040) (2025) · IRS: Instructions for Schedule SE (Form 1040) (2025) · IRS: Publication 334 (2025), Tax Guide for Small Business · IRS: Self-employed individuals tax center · IRS: 2026 Form 1040-ES, Estimated Tax for Individuals · IRS: When to file · IRS: Form 4868, Application for Automatic Extension of Time To File (2025) · IRS: Understanding your Form 1099-K · IRS: Filing tips and updates for gig economy workers · IRS: What kind of records should I keep · IRS: How long should I keep records · IRS: Income & expenses FAQ · IRS: Schedule C and record reconstruction training, scenario 3 (overstated expenses) · IRS: Payment plans; installment agreements · SBA: Pay taxes
