Multiple types of income

[Windylane64]

I have multiple types of income this year--consulting, unemployment (no taxes taken), and two different W-2 companies. I have not paid any taxes on the unemployment or consulting, which total only about $20k. I've been keeping books on my expenses. Can I deduct expenses that are greater than my consulting income (for the months I was consulting), such as portion of home rent, car payment, health insurance payments? What is the best way to avoid a big tax bill? Should I just get an accountant to walk me through all this?

[tgaborit]

It sure sounds like you had an interesting tax year.  I know this can seem a bit overwhelming but this is something you can handle with the assistance if TurboTax, and if you feel it is a bit much, we offer our Full Service Product to prepare the return for you.

Let's address each area one at a time to make it seem like small items instead of 1 large one.  

• The Consulting income:  Yes, you can deduct expenses towards the income such as Home Office Deductions, Vehicle Expenses, supplies and other items ordinary and necessary to complete your business.  The income and deductions will be reported on a Scheduled C and you will be required to pay regular tax as well as Self Employment Tax on the income after expenses.   Since you kept good records of your income and expenses filling in the Schedule C should be pretty straight forward.   Here is a great article on this topic for further clarification:  Reporting Self Employed Income and Deductions  
• Unemployment income is taxable to the Federal this year and each state has their own reporting requirements.  If you did not have tax withheld, you may be subject to the tax on your return.  Did you happen to pay any estimated tax payments based on your income that was not subject to withholding?  If not, there is still time to make at least one Estimated payment.  Estimated Tax Payment Information 
• The best way to avoid a large tax bill will be a combination of making sure you have documented all of your expenses for the consulting business income and possibly paying an Estimated Payment before the end of the year.  

[Windylane64]

Ok, great and thank you. Is there any benefit/penalty to paying/not paying an estimated tax payment in advance? If there is likely to be a penalty for not paying in advance (I'm in Arizona and all business was conducted here), I will make those payments asap. If there won't be a penalty, I'd rather not go through the exercise to estimate. I figure I'm going to owe some taxes either way.

[tgaborit]

There could be an estimated tax penalty, here is some information on the penalty and how to avoid it in many cases for Federal How to Avoid or Reduce Estimated Tax Penalties  

Arizona has some penalties as well, here is a great link on how to lesson or avoid them:  Penalties and Interest Arizona