Wednesday, February 14, 2007

Full-time Job and Freelancer: W-2 and 1099

Hi June,

My question is this. I have a full time job as a graphic designer and also do freelance on the side. I take a standard deduction on my W-2 form. As far as my freelance, I get 1099 forms for each company I work for each year. Can I take a standard deduction on my W-2 and still claim expenses against my 1099 forms?

Hello Joseph,

Your situation is typical of many graphic designers -- you have a job and you also freelance. And, your question is a designer's typical question in that it is more complicated than you realize.

Let's look at a few definitions. You receive a W-2 at year-end stating income earned when you have a salaried or wage payng job. When you freelance you get a 1099-MISC staying income earned.

Your tax return is filed on a Form 1040. You take a standard deduction on the 1040 instead of itemizing expenses like: medical costs; mortgage interest; real estate taxes; charitable contributions; and business expenses that you against your W-2 job.

A standard deduction has nothing to do with business expenses that you have against freelance income. Those kind of expenses go on a different part of your tax return. You can take the standard deduction and deduct all freelance business expenses.

Here's some more info from my website on this topic:
What'll it cost me to leave my W-2 job for the indie life?
You say you’re self-employed —Will the IRS? Let's first look at W-2 vs. 1099

And, as always, read the book that can simplify your tax and financial life, AND save you money!

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