Beth Skwarecki

Here is how I do my taxes, as a freelance writer. I am not a tax lawyer or an accountant or an IRS employee, so trust me at your peril. Be aware that if you owe more than $1000 in self-employment taxes (corresponding to roughly $10K of income) you're supposed to pay it in advance and settle up at the end of the year.

So, I'm a freelancer. I do a job for a client, then I send them an invoice. They send me a check. Later, as tax time approaches, I get a flurry of 1099-MISC forms in the mail.

A 1099-MISC is an "information return." I think of it as being like a W-2 except nobody cares about it. (You don't send your 1099s in with your taxes; they're just for your personal record-keeping.)

You should have all your 1099s by the end of January, and you'll only get them from clients that (a) paid you more than $600, and (b) remembered that they're supposed to send you a 1099.

So when I sit down to do my federal taxes, here is what I do:

Form: scratch paper
Firstly, I take my pile of 1099s (one from each client) and add up all the totals. Then I look into my own records (which I keep in gnucash) and add any income that I didn't get 1099s for.

Then, the other side of the business: I add up my deductible expenses. The easy things are office supplies, services you paid for, business-related travel, all that miscellaneous stuff. The less easy things?

* I don't claim a home office deduction, even though we went out of our way to rent a house with an office for me. The rules are too strict, and not worth it.

* Computers aren't regular expenses, since you pay for them in one year but use them for several years. So, you need to figure depreciation. You can either spread the cost of the computer over several years OR you can do it under Schedule 179 (thanks Tom!) which lets you deduct it all the first year. More about that in a minute.

Form: Schedule C - business profit or loss
Now, on Schedule C, I put my gross income (as above) and I list my expenses. For me these include:

* office supplies

* travel (I went to a professional conference)

* "other", listed on the back - the registration fee for that conference (it counts as professional education)

* depreciation, for my computer. For this I fill out form 4562. I deduct the full amount this year, in Part I, and I won't worry about it next year. You could also spread the cost out over several years, which is the traditional way to do it, and I think you can do that as listed equipment in Part V.

So, having recorded your income and your expenses, you subtract the one from the other, resulting in your profit. This is the number you'll carry over to the next form.

Form: Schedule SE - self-employment tax
Next comes figuring your self-employment tax. (Your employer has to pay part of your taxes, and your employer is you.) You write down your profit, and 15.3% of 92.35% of that number is the tax you pay. You get to deduct half of it, too. This form is quick and painless.

Form: 1040 (not EZ)
And now it's time for the fun part. If you or your spouse have any W-2 income, that goes under "wages, salaries, and tips". The 1099 from your bank (showing the pocket change you earned from your savings account) is for the "taxable interest" line. Then there's a line for "business income", which is the profit from your Schedule C, and then the catchall "other income" which is where you'd put any non-business related 1099 income, or anything else you acquired (like, in my case, jury duty compensation).

Later in the 1040 is a spot where you can deduct half of your SE tax, so make sure to fill that in. The rest is just like normal. On the back there is a line asking specifically what your SE tax came to, so include that too. Then do the math and see if you get a refund!

Oh, and don't forget your state and (if applicable) local taxes. Consider them an exercise left to the reader.

photo by OhioProgressive on Flickr

I print out the forms and do my taxes by hand. it's kind of fun. I have a compulsion to fill out forms that are in front of me, which may also explain why I like crosswords. Admittedly if there were a New York Times Sunday Tax Form, I'm sure the novelty would wear off pretty soon (then again, I bet Will Shortz could design a tax form that is clever and enjoyable to fill out.) As is, if I'm looking for a numbers puzzle, I enjoy this more than Sudoku.