Ellen Said:

Which tax forms do I need to fill out as a part-time freelance writer?

We Answered:

What you are supposed to do is claim all your income whether you received a Form 1099-Misc, W-2 or not. You will need also to complete a form called Schedule C (this is self-employment, sole-proprietor income) It also allows you to deduct your expenses that it took to earn that 1099-Misc income. The W-2 is earned income (wages) which goes on the 1040 as wages. The self-employment taxes will come from the Schedule C calculations. You may want to invest in some Turbo Tax Home and Business software.

Edward Said:

What is the correct way to declare freelance income?

We Answered:

I'm assuming that this job started during 2007. Anyway, you'll be receiving a Form 1099-MISC that will show your total revenue earned from the freelance writing job. If the amount is under $600, the organization isn't required to send you a 1099, but you're still required by law to report the income. You can simply report the total amount as "miscellaneous income" on page one of the 1040 and then complete Form SE to calculate your self-employment taxable income. However, if you have any expenses to offset this income, you'll need to complete Schedule C (for self-employment income). The Schedule C is pretty much like an income statement: tell the IRS how much revenue your business brought in, and then report what you had to spend to do it (expenses). You probably have at least some postage and paper expenses, I would think, so it's probably worth it to file Schedule C.

If you're feeling uncomfortable about the whole issue, it might be worth your while, at least for the first year anyway, to talk to an accountant (who is a tax preparer) about how to best handle this new business venture. Depending on how much this business is earning, you may need to pay estimated income taxes (federal and state). That's an area that can be really confusing, so it's best to talk to a tax pro who can look at your total tax picture and give you some one-on-one advice.

Good luck! Sounds like a fun business venture!