1. Yes.
2. You are paying regular income tax on the money, the rate of which varies with income, plus self-employment tax of 15.3%.
5. You can't deduct a home office for self-employment unless it's used exclusively for self-employment. If you have items that you use for both, you can deduct the percentage of self-employment business use. These expenses are generally not deductible for W-2 employment (although they are on some state returns).
6. No, as a sole proprietor, it all goes on one tax return.
7. Three years.
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