Tax Question for my freelance, please help?

Question

Hi, I am doing some graphic design freelance and I am making about $3000 a month from it.
I would like to buy a new computer and maybe lease a car with that money, can I use it as my deductable? I have a full-time job too so how does it work?
Do I fill W-2 or 1099? will someone give me some advice? Thanks so much

Answer 1

The business portions of those expenditures is deductible. Any personal use is not, including the commute to your other job.

You need to keep accurate records of all of your business income and expenses. You'll figure the business profit on Schedule C or C-EZ. You'll file Schedule SE to figure the Self-Employment tax on the business profit. That's at 15.3% of 92.35% of the net profit from the business.

You may or may not receive Forms 1099 from your clients but you MUST claim all income received.

With that much self-employment income it's almost a certainty that you will not have enough tax withheld from the full time job to cover your total tax liability. You'll need to make quarterly estimated payments to the IRS using Form 1040-ES.

How much you need to pay in will depend upon your other income and the withholdings there but it could be as high as 50% of the self-employment income though 35% is probably closer to correct for most taxpayers. The worksheets that accompany the 1040-ES package will help you determine the correct amounts to pay.

If you don't make the estimated payments you may be facing penalties and interest for underpayment of estimated taxes when you file your tax returns.

Don't forget state income taxes as well. All states with an income tax also require estimated tax payments.