Solopreneurs: Are You Overpaying Self-Employment Tax in 2025?

Why Solopreneurs Often Pay More Than They Should

If you’re running your business as a one-person show in 2025 — whether you’re a freelancer, consultant, or creative entrepreneur — you’re likely paying self-employment tax. But here’s the issue: many solopreneurs are handing the IRS more money than they owe. This isn’t because they want to; it’s because the tax code is complicated, deductions get missed, and bookkeeping often takes a back seat to client work.

A CPA for solopreneurs in Long Island can help change that. At Sundack CPA, we’ve seen too many solo business owners overpay simply because they didn’t have the right strategies in place. The good news? With proper planning and accurate financial tracking, you may legally reduce your tax bill — sometimes significantly.

Understanding Self-Employment Tax in 2025

Self-employment tax is made up of Social Security and Medicare taxes that traditional employees split with their employers. As a solopreneur, you’re both the employer and the employee — which means you’re responsible for the full 15.3% on your net earnings.

For 2025, the IRS rules remain straightforward in theory but tricky in practice:

• Social Security portion: 12.4% up to the wage base limit (which adjusts annually).

• Medicare portion: 2.9% on all earnings, plus an additional 0.9% for high-income earners.

Where many business owners go wrong is not realizing how business structure, expense tracking, and quarterly payments impact that total. Without guidance from a Long Island CPA firm experienced in self-employment tax, it’s easy to overpay — and difficult to spot the overpayment once you’ve filed.

Common misconceptions:

• Thinking deductions aren’t worth tracking if they’re “small.”

• Believing there’s no way to legally reduce self-employment tax.

• Assuming tax software will catch everything without professional review.

This is where working with a CPA Suffolk County professional who understands the nuances of New York State tax rules can make a difference.

The Most Common Reasons Solopreneurs Overpay

1. Missing Deductible Expenses

Small, everyday costs like software subscriptions, mileage, and home office expenses can add up. Many solopreneurs fail to claim them because they’re unsure if they qualify or fear an audit.

2. Skipping Quarterly Estimated Taxes

Not paying quarterly estimated taxes can lead to penalties and interest. But even worse, some solopreneurs overpay their quarterly estimates because they use outdated income figures.

3. Misclassifying Income or Deductions

If you’re mixing personal and business accounts, you may not be reporting your business income and expenses accurately — which can result in paying more tax than necessary.

4. Not Leveraging Retirement Contributions

Solo 401(k) and SEP IRA contributions can significantly reduce taxable income, but they’re often overlooked by business owners who don’t work with an accountant near me who specializes in self-employed clients.

Tax Planning Strategies That Save You Money

A CPA Long Island who works with solopreneurs daily can help you:

Implement a Proper Bookkeeping System

Working with a QuickBooks ProAdvisor Long Island or using another reliable accounting tool ensures you have accurate financial data year-round. This makes it easier to claim deductions, prepare quarterly estimates, and avoid year-end surprises.

Choose the Right Business Structure

In some cases, electing S-Corp status can reduce the portion of your income subject to self-employment tax. However, this decision must be carefully evaluated to ensure the benefits outweigh additional compliance requirements.

Maximize Deductions Without Triggering Red Flags

From professional development courses to certain travel expenses, a well-documented deduction strategy can reduce your taxable income while staying IRS-compliant.

Keep Personal and Business Finances Separate

Using a dedicated business bank account and credit card simplifies recordkeeping and reduces errors that could cause overpayment.

2025 Self-Employment Tax Deep Dive for Solopreneurs

While the basics of self-employment tax are simple in concept, the real-world application is where most solopreneurs lose money. The IRS rules are layered with nuances, and 2025 brings several factors that can make a difference in what you owe.

The 2025 Tax Landscape for Solopreneurs

The economy in 2025 is forcing many self-employed professionals to be more strategic with tax planning. Inflation remains a factor in operating costs, New York has made small adjustments to state filing rules, and the IRS continues its focus on gig economy compliance.

For Long Island solopreneurs, this means:

• Quarterly estimated tax requirements remain strict — late payments can still trigger penalties, even if you overpaid in prior quarters.

• 1099 reporting is expanding — platforms like PayPal, Stripe, and Etsy continue to issue 1099-K forms for lower thresholds, meaning more transactions are visible to the IRS.

• Home office deductions are under increased scrutiny — not to discourage use, but to ensure documentation is airtight.

A Long Island CPA firm familiar with both federal and New York State self-employment tax nuances can help you navigate these changes without costly missteps.

Common Reasons Overpayment Happens — Expanded View

1. Relying Solely on Tax Software

Automated programs can be helpful, but they work off what you input. If your expense categories are vague or you’re unsure how to classify a deduction, the software won’t correct you — meaning missed opportunities. A CPA Suffolk County professional can review your inputs for accuracy and compliance.

2. Forgetting “Occasional” Expenses

Many solopreneurs remember their big recurring bills but forget smaller or irregular expenses like domain renewals, one-off design work, or annual software licenses. These can collectively save hundreds in taxes.

3. Overestimating Quarterly Payments

Some overpayments happen because solopreneurs overcompensate for fear of underpayment penalties. While it’s good to be cautious, sending the IRS more than necessary essentially gives them an interest-free loan.

4. Misunderstanding Deduction Eligibility

If you’re unsure whether something qualifies, you may skip it altogether. For example, a client meeting at a coffee shop may be partially deductible if documented correctly — something a CPA for solopreneurs Long Island can clarify.

Self-Employment Tax Myths vs. Facts

Using expert tax help from Sundack, who understands these distinctions, ensures you aren’t operating on outdated or incorrect information.

When an S-Corp or LLC Can Help Reduce Self-Employment Tax

For some solopreneurs, changing your business entity can be a game-changer.

S-Corp Strategy

• How it works: You pay yourself a “reasonable salary” and take the rest of your profits as distributions. Only the salary portion is subject to self-employment tax; distributions are not.

• Potential savings: Depending on your profit level, this could save thousands annually.

• Cautions: You must run payroll, file additional tax forms, and ensure your salary meets IRS standards.

LLC Structure

• How it works: An LLC offers legal protection and flexible tax treatment. You can remain a sole proprietor for tax purposes or elect S-Corp status later.

• When it helps: If your business is growing and your net income is consistently high enough to benefit from S-Corp strategies, an LLC can be the first step.

A QuickBooks ProAdvisor Long Island who’s also a CPA can model different scenarios to determine if a structure change makes financial sense.

Year-Round Tax Management for Solopreneurs

Waiting until tax season to think about your taxes is one of the fastest ways to overpay. Instead, use a rolling strategy:

1. Monthly Review: Categorize income and expenses promptly to prevent missed deductions.

2. Quarterly Check-Ins: Adjust estimated tax payments based on actual performance, not just projections.

3. Mid-Year Planning: Assess whether you’re on track to exceed certain thresholds that might justify a structure change.

4. Pre-Year-End Adjustments: Consider last-minute deductions, retirement contributions, or expense timing to manage your taxable income.

With bookkeeping services Long Island business owners can rely on, Sundack CPA ensures this process is seamless.

Audit Preparedness Without Fear

Some solopreneurs avoid aggressive tax-saving strategies because they fear audits. The truth is, audits are rare for compliant taxpayers — and good recordkeeping is your best defense.

• Keep receipts (digital or paper) for at least three years.

• Maintain clear mileage logs for vehicle deductions.

• Save copies of invoices and bank statements to verify income.

An accounting firm that provides ongoing support makes audit readiness a natural byproduct of your daily processes.

Bringing It All Together

Reducing self-employment tax isn’t about cutting corners — it’s about strategic planning, compliance, and knowing the rules well enough to use them in your favor. Whether it’s restructuring your business, optimizing deductions, or adjusting quarterly payments, the right approach can free up cash flow for growth, savings, or simply keeping more of what you earn.

A CPA for solopreneurs Long Island like Sundack CPA combines deep local tax knowledge with the tools and systems to make it happen year after year.

How Sundack CPA Long Island Helps Solopreneurs

Sundack CPA offers specialized tax planning for freelancers, gig workers, and independent professionals. As a CPA for solopreneurs Long Island, we:

• Review your prior year’s return to identify possible overpayments.

• Create a quarterly tax payment plan that aligns with your actual income.

• Provide ongoing bookkeeping support so you’re always audit-ready.

• Offer bookkeeping services Long Island business owners can trust for accuracy and compliance.

• Advise on when and how to adjust your business structure to save on self-employment taxes.

Our team isn’t just focused on filing your taxes — we focus on long-term strategies that help you keep more of your hard-earned income.

Action Plan for Solopreneurs in 2025

If you suspect you’ve been overpaying self-employment tax, here’s what to do:

1. Gather Your Financial Records
   Include bank statements, invoices, receipts, and mileage logs.

2. Review Your Last Return with a Professional
   A tax help near me search can connect you to a local CPA, but working with a team like Sundack CPA means you get targeted expertise for Long Island businesses.

3. Set Up or Upgrade Your Bookkeeping System
   Even if you only have a handful of transactions per month, accurate tracking prevents missed deductions.

4. Schedule Quarterly Check-Ins
   Don’t wait until year-end to address tax savings opportunities.

Why Local Expertise Matters

While you could hire an accountant from anywhere, working with a CPA Suffolk County or accounting firm near me gives you access to professionals who understand New York’s unique tax environment. Local expertise can uncover deductions and credits specific to state and county regulations that national firms might overlook.

Final Thoughts: Stop Overpaying the IRS

Self-employment tax is unavoidable, but overpaying it is not. By working with a CPA for solopreneurs Long Island like Sundack CPA, you can identify missed opportunities, implement smarter tax strategies, and ensure you’re paying only what you legally owe — nothing more.

If you’re ready to keep more of your income in 2025, now is the time to take action.