[birdman]

I have a full-time graphic design job as my main source of income, but now I'm getting into freelance side projects that may add up to over $1,000 a year. Other than keeping track of how much money I'm making and reporting it on my 1040, are there any sneaky legal/tax issues I should be concerned about? Currently, my method is to send an invoice to the client (I just set up a template in Word with my logo, contact info, the name of the client, a list of costs incurred, and the total amount due), they pay me with a check, I deposit it into my savings account, I record the transaction in Money and mark it as "art income". When it comes to tax time, I'll report the "art income" amount for 2005 on my 1040 form.

Anything else I need to know?

-birdman

[Macola]

Consider setting up a business entity as a sole proprietorship or LLC, and reporting taxable income through it (Schedule C for SP or single-member LLCs, Form 1065 for partnership LLCs). Of course, for such a small amount, it may not be worth the time.

It all depends on what you want to do. Are you planning to turn this side income into a full-time business some day? If so, then setting up a business now is a good move.

[birdman]

Well, at this point I can't say I have any plan to do design work full time via self-employment. However, my life goal, if I'm successful at it, is to be a freelance cartoonist (newspaper syndication). In that case, setting up a business entity would make more sense. But I figured I'd cross that bridge when I come to it, if it ever gets built.

Right now, the freelance design biz is very minimal for me, although between that and playing the piano it might add up to over $1,000, depending on the year. This year I haven't done as much because of my cancer treatments.

-birdman

[art_director]

Macola gave you sound advice, however, if you're just doing it on the side you best stick with the sole proprietor approach as you're doing now. The extra returns and filings of an LLC or a S Corp would likely eat your freelance income.

Basically you have the right idea about taxes. Be sure to write off anything and everything that applies to your business -- freelance or otherwise. For an art director or designer that list includes:

- books -- whether design and advertising books or not

- cable tv

- internet connection

- newspaper and magazine subscriptions

- museum entrance fees, concert tickets, plays, etc. -- it's all popular culture and we're in the business of creating and or reflecting popular culture

- supplies including computer equipment, media, hard supplies for portfolios and comps

- camera equipment

- if you travel for work you can write off luggage purchases

- bags to carry work in -- portfolio cases, messenger bags, etc.

- cell phone bill

- fax line @ home

- if you have a dedicated office space you may write off a portion of your rent / mortgage


there's more but i'm in a hurry today.

[art_director]

- ipod

- music you buy -- CDs, MP3s, 8 track tapes, etc.