Taxes and self employment

[chideltjen]

I do some freelance graphic design on the side. Usually they are one time projects to help others out. It's not something regular either. Last project I did I only did about 2 hours of work and got less than $100.

My question is at what point should you start taking taxes out? Is it after how many hours you do or if you make over a certain amount of money in a month? I ask because I may have another project coming up soon that may pay me a little bit more because there is a lot more involved.

And what else is involved in saying that you are "self-employed" on your tax forms? Since I just started this, I want to make sure I don't mess anything up.

[aephi alum]

If I were you, I'd talk to an accountant.

Any time a client pays you more than (I think) $600 in the course of a tax year, they are supposed to issue you a Form 1099 by the end of January of the following year. When you file your taxes, you include these forms.

If a client fails to issue a 1099, or pays you so little that a 1099 is unnecessary (as with this client), if I were you I would report the income anyway, just in case you are audited. The IRS tends to frown on unreported income. (BTW, if a client should have issued you a 1099 and didn't, the IRS penalizes them - not you.)

Over the course of the year, you may have to pay quarterly estimated taxes. Your accountant can help you figure out how much to pay so that you're not left with a huge tax bill (and penalty fees) in April and so that you're not overpaying. You probably won't have to pay a lot since we're talking about a few hundred dollars.

[33girl]

Yeah, I agree, talk to an accountant. Ex-Mr 33 does lots of freelance stuff and believe me, it's worth it to pay someone to figure the taxes out because they're such a pain in the ass.