So far, it sounds as if you have the right idea.
When you prepare next year's tax return, you'll be using a Schedule C,
to report the income and expenses.
Report the income from the 1099 on the Income line.
Yes, to all your questions 1,2,3,4.
All your business-related travel is deductible.
As are all you business-related expenses, computers, software,
Internet connection, supplies and so forth.
Yes, you will qualify for office in home deductions, if you
should care to use them.
Keep track of your business charges on your credit card,
as well as in your personal checkbook.
Don't forget to track some of your cash expenses - things
like office supplies, postage, parking meters, tolls, valets,
You will be paying self-employment tax (Social Security
and Medicare) only on your business profits.
The rest of your profits will be reduced by your personal
exemptions and itemized deductions, if you have any.
So, the tax rate won't be 50%. It will be your tax rate at
that income level.
In fact, you might enjoy these books. They'll help you
identify more of the tax savings to which you're entitled.
Here are some books you might want to look at before you
make the decision - Fred Daily's Tax Savvy for Small Businesses
And Jan Zobel's Minding Her Own Business: The Self-Employed Woman?s
Essential Guide to Taxes and Financial Records
Of course, IRS has a couple of publications you might want to read:
Pub 334 Tax Guide for Small Business
Publication 463 Travel, Entertainment, Gift, and Car
Publication 533 Self-Employment Tax
Publication 552 Recordkeeping for Individuals
Publication 583 Starting a Business and Keeping Records
You asked about going to H&R Block next year.
You can. But I would only recommend doing that if
your local H&R Block office has someone with whom
you can establish a long-term relationship.
If you can have the manager or owner (some are franchises)
work with you personally, fine, go there.
If not, I strongly suggest that you find a good
local tax professional and establish a relationship.
H&R Block's fees for a tax return with all the forms
and schedules you will need, won't be less than $250.
For that price, you can have your own personal Tax Pro.
Better yet, set up a planning appointment and you'll
learn how to set up the right kind of retirement plan
and other tax benefits you and your family can use.
I do hope this helps.
You had enough sense to save the cost of DBA by
using your own name. And you were smart enough to
market a product or service that is popular enough
to generate sales. So I have a feeling you're also
smart enough to get good tax advice.
Clarification of Answer by
30 Aug 2005 10:36 PDT
I do not need a TID or need to go to the IRS for any reason, correct?
I can simply write these off my personal social security tax return.
The business is under my own name.
This is correct.
And when you say I need to file a Schedule C, does this mean I do not
need to include this in a 1040?
The Schedule C is one of the pages you attach to the Form 1040.
You'll be attaching several pages to your 1040, when you have a business.
Those books and/or IRS publications will explain in more detail.
Start with the Publication 334 to get an overview of how this works.
But at least you won't need to file any other kind of tax return
(like a corporation or partnership, etc.) just your very long,
personal income tax return (Form 1040 and schedules/forms).