When I was a contractor I bought a very simple 2 copy invoice book and used it to report my time. Since yours is likely to be more complex, given that you (rightly) want to document your time by client so she can do bilings, Excel is likely the right solution for you. My manager did wild things with macros and lists in Excel for our timesheet :)
As for taxes, I haven't done this in the US, but from what I hear it's similar to Canada - the first year you work as a contractor, the IRS doesn't know about it, and so at the end of the year, you file your tax return and you owe $X in taxes. You declare your income based on the invoices your have billed out and received.
At that time, the IRS wakes up and says "hey, you don't get to wait till the end of the year to pay your taxes, you need to pay them throughout the year like everyone else does" and makes you "estimate" your next year's wages, and then make quarterly payments.
At the end of the second year, you then file your tax return, declaring your actual income, subtracting the tax you've already paid over the course of the year, and determine whether you owe more or have a refund coming to you.
In Canada, as a contractor, you need to keep track of all your expenses as you get to declare those against your income. The US is a bit weirder what with the whole itemizing/non itemizing thing - but I would suggest keeping everything anyway as it's better to toss it all away in a year than to not have it.
Hope some of this helps!
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