1040 and Schedule C

I am not a lawyer. Always ask a lawyer / tax advisor about your specific situation. But in general, The IRS has information on paying people for businesses expenses here -

IRS Publication for Small Businesses

When you're a home business, in general you are sending in all your tax paperwork on your regular 1040 - like you do as a "regular human being" - plus you send in a Schedule C to cover your business income and expenses. There aren't extra forms you have to fill out. You just do those normal things, using your normal social security number as your ID.

I used TurboTax for 8 years straight (since the dawn of computers pretty much!) and then finally gave in and used a CPA. With the TurboTax small business edition costing I believe $90 a year to buy, it really wasn't that much more to pay the $200 to a CPA to have him do the taxes for me - and he ended up finding a ton of deductions I hadn't thought of even with TurboTax. So I really do believe that the relatively small amount of money you put into a tax preparer's hands really pays itself back. I know $200 seems like a lot, but they are worth every penny.

If you want to do it yourself, make sure you study that Schedule C and look at all the things you can deduct. You can deduct postage when you mail out flyers. You can deduct your computer fees, when you log on to look at your competitors for market research. You can deduct organizations you belong to for your networking. You can deduct mileage when you drive to and fro from business meetings. Just document each expense, and if it relates to your business, it is probably deductible.

So at the end of the year, put all of your income, your expenses and your deductions onto the Schedule C, and it plunks right into your normal 1040 form. It's really not that tricky, compared to other government-related tasks!

Taxes and your Home Business
Working from Home