I have a 9-5 FT job but do IT consulting on the side for a few clients. No one has ever issued me a 1099 until now. I did work for a client that included parts and labor. I marked up parts, had several hours of labor, and on my invoice to him, I charged him his state's tax rate (I did work out of my state). I was simply trying to recoup the taxes I paid for the parts in my state (7%) and charged him his state's rate (6%) on my SALE price for the parts. I charged her no tax on labor.

I am new to this and was not planning on having this small project have tax ramifications (I know this is not right and will make changes starting now) but now it does. I specifically charged him a reduced labor rate, less markup on equipment, no tax on labor, and no travel expenses because this was supposed to be off the books. Now since it is not, I will pay dearly which is fine, but I wanted to know how to go about any possible deductions that I may be eligible for. What can I deduct? If I do one or two projects a year over $500 and get issued 1099 forms, I do not know what I am legally allowed to deduct and also, what should I do about charging taxes on parts and/or labor. I am a completel novice and am looking for some real advice that can get me on the right track now and moving forward. Thanks in advance, I truly appreciate your help.