Key takeaways
- A refund equals total tax owed minus total paid in (withholding plus estimated payments).
- Self-employed workers often owe a balance because nothing is withheld during the year.
- Every deduction lowers both income tax and self-employment tax, so it directly grows your refund.
- Each dependent under 17 can cut tax by up to $2,000 via the Child Tax Credit.
How is a tax refund calculated?
A tax refund is simply the money you overpaid during the year. The IRS works out your total tax for the year, compares it to everything you already paid in through paycheck withholding and quarterly estimated payments, and refunds the difference. If you paid in less than your total tax, you owe a balance instead. In formula form:
For a self-employed person, total tax owed is self-employment tax (15.3 percent on 92.35 percent of net profit) plus federal income tax on what is left after the standard deduction, minus credits like the Child Tax Credit. The estimator above runs this calculation for you, so you can see your number before tax season.
Do freelancers and 1099 contractors get a tax refund?
Sometimes, but it works differently than for an employee. A W-2 employee usually gets a refund because their employer withholds a little extra from every paycheck. A freelancer or 1099 contractor has no withholding at all, so a refund only happens if your quarterly estimated payments (or a spouse's withholding) added up to more than your tax. Many contractors actually owe a balance the first year, because they did not realize they needed to pay as they earned.
The good news: you control the biggest variable. Because your tax is based on net profit, claiming every legitimate business deduction shrinks the tax you owe and can flip a balance due into a refund. That is where good record-keeping pays off literally.
How to get a bigger tax refund when self-employed
There is no trick, just a few reliable levers. Each one lowers your taxable profit, which lowers both your income tax and your self-employment tax:
- Claim every deduction. Home office, mileage, software, supplies, phone and internet, business meals, and your website all count. Missed receipts are missed refund.
- Track mileage all year. At 70 cents per mile for 2025, business driving adds up to a large deduction most contractors under-claim.
- Fund a retirement account. A SEP-IRA or Solo 401(k) contribution before the deadline reduces taxable income dollar for dollar.
- Deduct self-employed health insurance. Premiums you pay yourself are often deductible above the line.
- Do not forget the Child Tax Credit. Up to $2,000 per qualifying child directly reduces the tax you owe.
The common thread is documentation. You can only deduct what you can prove, which is why tracking receipts and miles during the year is the difference between an estimate and a real, maximized refund.
NeoReceipt captures every receipt and mile automatically and sorts them for Schedule C, so nothing slips through the cracks at tax time.
Try NeoReceipt freeWhen will you get your refund?
The IRS issues most refunds within 21 daysof accepting an e-filed return with direct deposit. Paper returns take longer, and returns that claim certain credits may be held briefly for review. To get your money fastest, file electronically, choose direct deposit, and make sure your return is accurate the first time. You can check progress with the IRS Where's My Refund tool about 24 hours after e-filing.
Why you might owe instead of getting a refund
If the estimator shows a balance due, the usual reasons are: you are self-employed and made no (or too-small) quarterly estimated payments, your income grew during the year, or you missed deductions that would have lowered the bill. Owing is not a penalty by itself, but underpaying throughout the year can trigger an underpayment penalty. The fix is to pay quarterly estimated taxes and to track deductions so your taxable profit and your bill are as low as legitimately possible.
Tax refund glossary
- Tax refund
- Money returned to you when your payments during the year exceed your total tax owed.
- Balance due
- The amount you still owe at filing when your payments fall short of your total tax.
- Withholding
- Tax an employer takes from a W-2 paycheck and sends to the IRS for you. Contractors have none.
- Estimated payments
- Quarterly tax payments the self-employed make because nothing is withheld from their income.
- Net profit
- Your income minus deductible business expenses. Your tax is based on this, not gross income.
- Self-employment tax
- The 15.3% Social Security and Medicare tax on 92.35% of net profit, reported on Schedule SE.
- Child Tax Credit
- Up to $2,000 per qualifying child under 17 that directly reduces the income tax you owe.