Missed estimated payment: Not a big deal

June --

I'm self employed. I just got my taxes back from my accountant (I was only FT self-employed for about 1/4 of 2009, so I still had a reasonable tax refund last year (don't ask, minimum wage with child credits, etc).

Anyhow, my accountant applied my refund towards my estimated taxes for 2010 (which is a good thing). My next estimated tax payment is now due, and I won't have it for a little while.

So right now, it looks like this.

Original fed refund: 2000
Original estimated payment due 4/15: 3000
I don't have the $1000 right now to pay Fed (or the $800 for state).

Can I make those payments on the *next* quarterly payment? Or am I going to get penalized by the IRS if I pay my estimated taxes later than the quarterly due date?

Either way, it's going to be late... but I need to know if it can wait until the next quarter, or if I need to pay it ASAP, and then pay the *regular* estimated payments next quarter.


Eric
Technology Consultant


Dear Eric,

You may wait until the next quarter payment and add the difference to that.

If yours and your tax pro's estimate of 2010 income is correct and you should have paid exactly $3000 as an estimated, then when you pay the missed $1000 in June instead of April it will cost you only a little bit of interest.

You will have owed the IRS $1000 for 2 months. At 5% a year that's $8.33 interest. Which is calculated later, when you file your 2010 tax return.

Read this post: A Primer on Estimated Taxes .

-- June

How does an indie pay Social Security Tax?

June --

I'm an independent military advisor ... have been for 3.5 weeks.

I have had one gig as an indie. I think I am going to be OK on income taxes. But I have searched your website, how do I make Social Security payments from my indie check? I tried to search your site to find the answer w/o bothering you, never could. I

Thanks in advance for you assistance,
Dean
Colorado Springs, CO


Hello Dean,


Good question. On their earned income, self-employeds, just as do employees, must pay three different taxes to the feds: income tax; social security tax ; medicare tax. Employees have these taxes withheld by their employers. The employer sends the withheld tax to the government.

For self-employeds social security tax and medicare tax are combined into self-employment tax. That's SE tax.

On a self-employed's federal tax return in addition to other forms there is a Form SE on which SE tax is calculated. SE tax is then combined with income tax liability to come up with total tax liability.

The calculation is done on the 1040 tax return and is paid via the tax return.

Be sure to read this post Estimated Taxes.

Best,
June

You don't have to be a math whiz to figure out estimated taxes.

Hi June,

My name is Pete, from Boston, MA. For the past few months I've been freelancing as a web designer.

I've had a hard time finding the right information on estimated taxes. Basically, I've been just about scared away from continuing my freelance business and feel like cutting my losses, wiping my hands of this and finding a job that will give me a W-2.

The bottom line is: I've made about $10,000 total since I started freelancing in May, and I know I need to make a payment by September 15th. But I simply do not know how to figure out what amount I should be paying - even though I've researched endlessly (as you may have guessed - I'm not a math whiz). All the information out there on the web and in books seems to direct me to last year's taxes - 'take your adjusted gross income from last year, and...' - but I don't see how that's relevant at all when I just started doing this in May (also, I was a student most of last year).

Also, I can't figure out if my wife's income (she's a public school teacher) should come into play when estimating my tax payment.

I've spoken with a couple of accountants through personal contacts of mine, but I haven't gotten far on free advice. I've wondered if I need to just pull the trigger and hire an accountant to help me. I hope you can give some advice.

I found your site through searching 'can I pay estimated tax with a credit card', so you can imagine I'm sweating this quite a bit right now :)

Thanks very much for your time.

- Pete

PS - Even a quick answer like "You made $10,000, your estimated tax is $4,000" would be fantastic.


Oh my goodness, Pete. Stop sweating. First of all, nothing horrendous happens if you don't pay estimated taxes on time or ever. You may pay what you owe later on. And, you may owe some penalty and interest. Maybe.

Husband and wife typically file a joint return. Calculations are based on their combined income and expenses. Their total tax is based on their total income and various deductions.

If there is money coming in on which tax was not withheld -- for instance, dividends from investments [OK bad example at this time] let's say rental income from the beach house, well then estimated taxes may be necessary.

Or there may be large amounts of income on which no tax was withheld but perhaps there was over-withholding on wages that made up for it so no estimateds are required.

To determine estimated taxes you need to look at your entire tax situation.

That said, here's an example with real numbers. Plan on paying about 1/3 of your net income toward taxes. Could be more. Could be less. But that's a safe bet.

So if you had $10,000 gross income and only $1000 expenses against it then your net is $9000. So plan on $3000 to the feds and state government.

Or: $10,000 gross, minus $4000 expenses, leaves $6000 net. So only $2000 goes to taxes.

You said you're not a math whiz. If you had six bottles of beer and two friends and you wanted to share, how many bottles would each get? That's 6 divided by 3 = 2. Now add the zeros.

Here are two must read posts: Estimated Taxes and Estimated Tax: How much should I pay?

Do let me know if this doesn't help you with the sweats.

Cheers,
June

A Primer on Estimated Taxes

Hi,

Ive been working as a therapist since the beginning of this year. I know that I will miss today's quarterly taxes filing deadline because Im not sure how to estimate what I will need to pay and afraid I will not have the funds to pay it until my next paycheck. I dont get taxes taken out of my checks because I am an independent contractor but know that/figure that I need to make quarterly tax payments.

Please let me know if you can provide any assistance in helping me file at some point this week or at the least help me figure out how much I owe.

Keida
Bowie, MD


Keida --

Your answer is in this post: Estimated Taxes . It starts out this way ...

I am getting lots of questions on estimated taxes, so I thought an overview necessary.
Here 'tis.Federal income tax, Social Security tax and Medicare tax are pay-as-you-go taxes; that is, the tax must be paid as income is earned. Dennis Dubya-two, shipping clerk for Toys 'n' Things, receives a paycheck every week. Each week Toys 'n' Things withholds all applicable taxes from Dennis’ pay and forwards them to various government agencies. At the end of the year Dennis receives a W-2 which shows income earned and taxes paid.

Self-employeds must follow the same pay-as-you-go method as do wage earners like Dennis. As an entrepreneur brings in income he withholds taxes from himself -- that is, he puts money aside -- and then sends his taxes to the government via estimated tax payments.

Not every self-employed has to make estimated tax payments.
It’s the overall tax liability of a self-employed that determines whether estimated tax payments are required. An indie’s total tax liability is made up of ... continue here

Working and Traveling in More Than One State

June --

IT Consultant. I started work on 1099 in Oct 2008 on a 6 month contract in CA.

As a 1099 I am subject to self employment tax for Social Security and Medicare. Does CA have any additional self employment taxes to be paid?

If I travel to CA from TX on Sunday evening around 6pm and reach at 10pm, can I claim the full per diem amount for lodging and meals for that day or can I claim the per diem amount only on the days I work in CA?

Thank you
Bill
Dallas, TX


Dear Bill,

California has no self-employment tax. You may be subject to CA income tax. Read my posts here taxes -- state / nonresident state (6)

Travel meal expenses are explained in my posts here expenses -- travel (17) and here expenses -- meals and entertainment (12) and here .

-- June

Home Office Exclusivity & Estimated Taxes

Hello,

I do admin type work for a non-profit. It is very straight forward. I send them an invoice for the time I spend doing various things, and I get a check for that amount. I get a 1099 for my taxes. I don't have expenses really. I don't travel, use up office supplies, etc.

I am finding your website helpful, but wanted clarification on one of the archived topics: Office in the home expense. I use the office in our house to do my work. My children do look at books in the office, but it is because it's the only place the bookcase fits. My husband uses the computer to check email a couple of times a week, but other than that, I am the only one that uses it frequently. Can I claim that? It is where I do my work.

Most - about 95% - of Internet use is me working. Can I claim that?

I just end up sending so much of what I make to the government. I would have to save two or 3 checks to pay the taxes in April. I don't have a steady income, so estimated payments won't work. During the summer I combine a month or two of invoices, just because it barely worked. I hope I am not rambling - sorry!

Any help is appreciated.

Thank you.
Kasey
Fort Worth, TX


Hello Kasey,

For starters, it sounds as if you are really an employee who happens to work at home. The non-profit is your employer.

But let's look at the situation as you describe it.

If your children treat your office as part of their home you may not take the entire room as a home office. You may take only the area of the room that is off-limits to the children. Keep in mind that a home office does not have to be an entire room.

If your husband comes into your office to use your computer then the office is not exclusively used for your business and so it is not a deductible office-in-home expense for you. Since you use the internet 95% for business you would be allowed to deduct 95% of its cost. If you use the computer 95% for business then you may deduct 95% of the cost of the computer.

Since money is tight think of some way for your husband to check his email elsewhere. Of course, if it's a laptop you could bring it into the kitchen for him. Or, see how much a home office would save you in taxes. It might save enough to warrant buying him a really cheap, basic computer just for emailing.

As far as estimated taxes, you might want to try this: Look at last year's tax return. If, for instance, 30% of your income went toward taxes, then, take 30% of every check and put it aside -- into a separate bank account if necessary. Then on estimated payment due dates, pay whatever is in that set-aside-account as your tax payment.

Hope that helps a little.

Best,
June

Indies: Do it right.

June –

I am a nuclear engineer from Knoxville, Tennessee. I just started December 3, 2007. I would like to start off without calling attention to the IRS.

I assume I need to pay quarterly estimated taxes but am not sure how to estimate them.

When was the last update of your book, Self-employed Tax Solutions?

If I use Schedule C must I also fill out the SE Form?

Your help would be appreciated.

Thanks,
Max


Hi Max,

I am not sure what you mean by “without calling attention to the IRS.” And if you mean you don’t want to call attention to yourself in the eyes of the IRS, I am still unsure.

Every new indie -- such as you – needs to get as much information about self-employment income, expenses and taxes as possible. Your goal should be to pay the least tax legitimately possible and to avoid missed deadlines and payments so that you don’t get stuck paying penalties and interest.

As in nuclear energy, the aim is economy, simplicity and doing it right. Rather than thinking of your task as an indie in terms of keeping the government off your back or out of your business affairs, think in terms of avoiding mistakes and delays that would cause problems and overpayment of taxes – in other words, learn how to do it right.

Here is my post on how to calculate and pay Estimated Taxes .

Yes, a Schedule C: Profit or Loss from Business, and a Form SE: Self-employment Tax, are part of your tax return.

My book, Self-employed Tax Solutions, just went into its 6th printing. My purpose in writing it is to give indies an understanding of how the IRS looks at self-employment and also to give them a basic foundation in income, taxes, expenses, and recordkeeping. The book does that and will always do that.

Other than an adjustment to the treatment of start-up costs the tax laws have not changed since the book was published in 2005. As you may know from reading my material or attending one of my seminars I advise indies to have a professional prepare their returns. So, when I say that the tax laws haven’t changed I mean, for example, that the method of recording and calculating business miles remains the same. Yes, the per mile amount allowed by the IRS changes every year. That is something your tax pro knows or you can look up on the IRS site. But, what your tax pro probably has not told you, nor has it changed, is that you should write down your odometer reading in your calendar on New Year’s Eve before you go out to party.

Get the idea? Hope that helps.

Best,
June

First Year Freelance Writer

Hi June,

I started working as a full-time freelance writer in January 2007, and since then I haven't paid any taxes. (I did pay my income taxes in April, but that was based on my normal full-time job from 2006.)

I've missed three periods of paying estimated taxes, and now I'm not sure if/when I should pay them or if I am exempt because it's my first year as a self-employed freelancer.

I know I probably need to pay a penalty to the IRS but I'm not even sure how to do that.

Will general tax software be able to help me with this?

I really want to get back on track with all of my taxes and all caught up. Any help you have on how to do this would be much appreciated.

Thanks, Stephanie New York, NY


Hello Stephanie,

First: You are not exempt from taxes because this is your first year of freelancing. Now who could have told you that?!

Read this Estimated Taxes to get an overview of how estimated taxes work. Then read my other blog posts on estimated taxes if you need more info.

I do not think that tax software does a good job for indies. Most programs are geared for employees or else small businesses that make widgets. Independent professionals are a unique breed and need special tax treatment by a pro who understands tax law as it applies to the self-employed. Educate yourself about what is and is not deductible. Read my posts on how to pick a tax pro and you'll be headed in the right direction. If you want more information, my book, Self-employed Tax Solutions, will give you a solid understanding of the basics.

Best,
June

Web developer with lots of questions

My answers to Peter are embedded below. Think that makes it easier with so much going on in his correspondence.
-- June


Hi June,

Great site. Thank you. I must say, a lot of info - possibly too much to find all the questions I have. Try the "search" box in the upper left of the screen. It may help.

I am a web developer. I started an LLC (sole proprietorship) in Ohio last month. I have couple of clients I make websites for (some for over 2 years now) and as expected I have some questions about what my new "status" brings:

1) When I receive checks, they all go to my business account. I read on your site that as a sole proprietor I am not an employee but rather I AM the company itself. Therefore: How do I pay myself? You don't pay yourself. You may take money whenever you like. You "income" is the profit your business has at year end. Can I just take the money from the same bank account, do I write myself a check, or what? Write a check to yourself or to cash.

2) How do I pay taxes? Read this post Estimated Taxes I have an EIN, I have no employees, and I have some freelance developers doing some work for me at times - I consider them as vendors, not employees.

3) What are the benefits of having an accountant, Jack Smith has a web making program. Why does he need a web developer? I do not do much business really, one or two checks a month come in... I read somewhere that in order to comply with the Limited Liability part, I need to separate my business and personal expenses. If you are an LLC you must have a separate checking account and a separate credit card to maintain limited liability.This comes together with Q#1: If I pay myself, transfer money to my personal account, or buy personal things directly with my business credit card, does that in any way change the LL part of the LLC? Yes.

4) How do I know if I should charge my customers a Sales Tax?? Every state is different. Call your state tax office.

5) What can you do for me, besides making my life easier by answering the above questions, or at least pointing me in the right direction? Contrary to most laymen's thinking, tax preparation for indies -- and many other situations -- is not simply putting #s on specific lines. There are often many choices for the same kid of deduction, there is different tax treatment for similar situations, there are different kinds of pensions for indies depending on income, age, family situation.

Just like Jack Smith doing his own website. For some Jacks it might be OK for other Jacks it might mean a big loss of money.

Thank you so much in advance! You are very welcome.

I can tell by your questions that you would benefit from the info in my book, Self-employed Tax Solutions. You might want to check it out.


All best, Peter, OH

Indie business Mindset: Success starts with homework

June,

My business is manufacturing of pneumatic cylinders since 2005.

If I had a refund for the tax year of 2005 and I owe for the tax year 2006, why do I have to pay an estimated tax now for tax year 2007?

Rosann


Rosann,

Refund or owe is not a determining factor in whether or not estimated tax payments are required. Payments are determined by your entire tax picture. For an explanation, take a look at Estimated Taxes posted earlier.

If I may, I am going to use your question as an example for other blog visitors. My goal for my blog and website and all my other writing and speaking is to get as much accurate, clear, simple information to as many indies as possible.

I also work at teaching indies how to get information. Many people who have read my book on tax basics send me beyond-the-basics type questions. Or people have unique situations like those of a cruise ship entertainer who lives on the ship, or a graphic designer who signed a really bad work-for-hire contract. I am still doing research on several of these kinds of questions received recently.

But with a lot of questions that I get it's obvious that no research effort has been done. A smart question goes something like this: "I have read your 5 or 6 posts on estimated taxes and still have the following question ..." [Categories are on the left. There's also ARCHIVES on my website.]

Do your homework, get some background on your question topic. If you know nothing, how will you know that my answer or anyone else's is correct?

My husband was an investigative reporter for a long time and he always did his homework. He told me that only if you really knew the background of the person your were about to interview would you be able to tell whether his answers had the ring of truth. Often he'd start with a question to which he already knew the answer.

Remember, you are a professional. You must have an indie business mindset in order to be successful.

-- June

I am an LLC. How do I pay taxes?

Hello June,

I am glad I discovered your blog. Already I learned a great deal! Anyway, I am starting an LLC in NY with 2 other members and am a bit concerned about messing up with estimated & self employment taxes. I am the managing member and the other 2 will not participate in management issues. It is a brand new business so how will estimated taxes be calculated?

Also, I understand I am subject to self employment taxes and they should not, but is this done only after profits/losses are distributed? If the business has no net income, does that mean I pay no self-employment taxes?

Thank you for any help you can give, I just want to get this right. Rhonda in the Bronx :)


Hi Rhonda,

I, too, am glad that you discovered my blog!

You say you are an LLC with other people. I assume from that you have formed a partnership. I cannot say it frequently enough so i will take another opportunity here: An LLC [Limited Liability Company] is a legal entity and can be a sole proprietorship, partnership or corporation. More info here LLC? Incorporate?

As a self-employed you -- and your partners -- [I am not sure what you mean by "they should not"] must pay federal and state income tax and self-employment [SE] tax. Depending on your income amount you may also be subject to New York City Unincorporated Business Tax. SE tax is based upon your business net profit. No profit means no SE tax. Income tax is based upon your net profit and all your other income as well. Taxes are explained on my website here Taxes: Which ones and how much do I pay?

You may have to pay estimated taxes. It depends on business and all other income and also how much may be withheld from your spouse's income, or via a pension, etc. How much and when to pay estimated tax is explained in this blog post Estimated Taxes .

Wish you much success!
June

Estimated taxes when both an employee & self-employed

June,

I've been self-employed for about 1 year. I've been making my quarterly SE tax payments. If I choose to return to an employee (w-2) job, am I required to continue making quarterly SE payments?

Dave

Dave, I assume by SE tax payments you mean estimated tax payments. Take a look at these posts below. If they don't answer your question, then please get back to me.

Estimated Taxes

Estimated Tax: How much to plan for

Estimated Taxes Paid Late

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

Estimated Taxes

I am getting lots of questions on estimated taxes, so I thought an overview necessary. Here 'tis.

Federal income tax, Social Security tax and Medicare tax are pay-as-you-go taxes; that is, the tax must be paid as income is earned. Dennis Dubya-two, shipping clerk for Toys 'n' Things, receives a paycheck every week. Each week Toys 'n' Things withholds all applicable taxes from Dennis’ pay and forwards them to various government agencies. At the end of the year Dennis receives a W-2 which shows income earned and taxes paid.

Self-employeds must follow the same pay-as-you-go method as do wage earners like Dennis. As an entrepreneur brings in income he withholds taxes from himself -- that is, he puts money aside -- and then sends his taxes to the government via estimated tax payments.

Not every self-employed has to make estimated tax payments.
It’s the overall tax liability of a self-employed that determines whether estimated tax payments are required. An indie’s total tax liability is made up of self-employment (SE) tax on his net self-employed earnings and income tax on all his and his spouse’s income.

SE tax and income tax on self-employed income are not the only factors in calculating estimated tax payments. If, for instance, you had a self-employed business income of $10,000 and also had investment dividends of $30,000, both these sources of income (totaling $40,000) would be elements in your estimated tax calculation. And if your wife earned $90,000 at her W-2 job, the taxes withheld from her income would also be a factor in those calculations.

Because someone is self-employed doesn’t necessarily mean that he must make estimated tax payments. Consider the following situations:
** When all income and deductions are combined, there is no tax liability. For instance, enough tax may be withheld via a W-2 job or pension withdrawals to cover the entire tax liability.
** The previous year’s tax refund may be carried forward in a sufficient amount to eliminate the need for estimated payments.

Who must make estimated tax payments?
Although there are exceptions, here's the safe and simple rule:
You must make estimated tax payments to the Federal government if you had a tax liability for the previous year and you expect to owe tax of $1,000 or more when you file your tax return for this year.

For more information on how to calculate estimated tax payments go to my site for Estimated Tax:How much should I pay?

When to make estimated payments:
Under most circumstances you will make four estimated tax payments to the IRS and also possibly to your resident state and, if you earn self-employed income elsewhere, to a non-resident state as well. The methods used to calculate the IRS estimated payment amount usually apply in the same way to the states – but to be sure you ought to confirm this with your tax preparer or state tax office.

The following shows the dates for making estimated payments.

For the period.............................Due date:
January 1 through March 31......April 15
April 1 through May 31...............June 15
June 1 through August 31..........September 15
Sept. 1 through Dec. 31.............January 15, the following year

It is not a crisis if you’re late on a payment due date. Depending on the amount of tax payment, an interest and/or penalty amount will be calculated at the time your tax return is prepared. The IRS rate is lower than most credit card finance charge rates.

How to pay estimated taxes:
There are several ways to pay estimated taxes.

Carry forward a previous year overpayment.
When you file your tax return, if you have an overpayment of tax you can choose to have the refund returned to you or you can apply part or all of it to your estimated tax for the following year.

The amount you have carried forward as payment toward the following year should be taken into account when figuring your estimated payments. You can use all the carry-forward amount toward your first payment, or you can spread it out in any way you choose among any or all of your payments. If you find the January 15 payment difficult because of holiday spending then use your carry-forward to ease your cash flow and have it applied to the fourth payment.

Pay by check.
Use Form 1040-ES, Payment Voucher, to pay Federal estimated tax. There are four numbered vouchers. Include one with each payment by check.

Be sure the voucher is filled in accurately. If you are married then put the names and Social Security numbers in the same order as they appear on your tax return.

Make the check or money order payable to the “United States Treasury.” On the check or money order write your Social Security number and “2007 Form 1040-ES.” Don’t staple or clip the check to the voucher.

If you made estimated tax payments in the previous year, you’ll receive IRS payment vouchers in the mail for the current year. You can get the vouchers and mailing address (it is not the same as that to which you mail your tax return) at www.irs.gov.

Careful! Never send a payment to the IRS (or any government agency) without the correct document – for example, a voucher-- properly filled out, accompanying it.

Pay by credit card, electronic payment or withdrawal.
Be careful if you pay your estimateds, or any other tax, by credit card. Most service providers charge a fee. This is in addition to any finance charges that will accrue, usually daily, on the amount you owe the credit card company. The options for credit card and electronic tax payments or funds withdrawal are changing rapidly. You can get the most current information at http://www.irs.gov/pub/irs-pdf/f1040es.pdf.

Estimated taxes are explained in greater detail in my book, Self-employed TAX Solutions.

Estimated Tax: How Much To Plan For

June --

My accountant told me that, on an income of $72,000, that I should pay $6,215 every quarter as an estimated tax payment. Does that seem accurate? I have colleagues with larger client bases making more than that and paying less, so I'm confused.

Also, I'm a little intimidated since I wasn't planning for such a high tax liability. Guidance?

Jon-David, New York


Jon-David, let's look at income in relation to taxes.

Which income are you talking about? Gross income, which is all the money you bring in; or net income, which is what you have left after deducting all business expenses.

Perhaps your colleagues have a higher gross income, but because they have more expenses, or are better at keeping records of their expenses, or have a sharper tax pro, their net income is less.

As a general rule, I tell indies to plan on 30% to 40% of their net income going to taxes. It can be higher or lower than that depending on income level and state taxes. Your four payments of $6,215 equal about 34% of your $72,000 income, so that may be correct.

You can learn more about taxes in the column on my website Taxes: Which ones and how much do I pay?

Also, check out the post below, Estimated Taxes Paid Late .

-- June

Estimated Taxes Paid Late

June --

I have a question regarding Estimated Tax. My income did not change a lot from last year, but now after I completed the filing and printed the forms I noticed that I have four vouchers for estimated tax and one for my owed tax. So I have to pay $1415 -- the amount I owe for 2006 and the estimated taxes?

I have four payments of $351. It is correct or I did something wrong on my filling?

What’s happens if I don’t make these payments? I think this year I had to pay underpayment penalty of $50.

Thank you for your advice.

Marcel


Hello Marcel,

Four payments of $351 = $1404. If the tax program you're using did it correctly it'll have you pay for 2007 what your tax was in 2006. Was your 2006 tax about $1400?

Nothing terrible happens if you pay your estimated taxes late, or even if don't pay them at all. You'll simply owe some penalty and interest.

I suggest you read the following two columns from my site: Estimated Tax Payments and Estimated Tax: How much should I pay?

Best regards,
June Walker


June, thank you, thank you so much for your response. I wasn't sure and I was afraid to send them away. Also thank you for the stuff you put out there on your website, it helps a lot a novice like me.
Marcel

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!SELF-EMPLOYED TAX SOLUTIONS .