I am a freelancer but I have a 40-hour a week contract with an employer who pays me on W2, taking taxes out. I'm still not considered full-time and they don't provide me benefits. How do I account for self-employed status and home office deductions in this case?
You don't. If you received a W-2 you are an employee, despite the fact that you are not receiving "benefits". W-2 employees cannot deduct job-related expenses like a home office on a federal tax return.
-W-2 employees cannot deduct job-related expenses on a federal return. Job-related expenses were eliminated as a federal deduction for W-2 employees by the tax laws that changed for 2018 and beyond. Your state tax laws might be different in AL, AR, CA, HI, MN, NY or PA.
If you live in a state that lets you deduct job-related expenses, the information will flow from your federal return to the state return, so enter it in Federal>Deductions and Credits>Employment Expenses>Job-Related Expenses
One question---is the box for "Statutory employee" checked on your W-2?
"That can't be correct.."
@avneige --
@xmasbaby0 is correct.
If your income is reported on a W-2, then as far as the IRS is concerned you are an employee. You may regard yourself as a self-employed free-lancer, but the IRS won't.
Per the IRS:
Employees are not eligible to claim the home office deduction.
https://www.irs.gov/newsroom/how-small-business-owners-can-deduct-their-home-office-from-their-taxes
The income of a self-employed individual is reported on a 1099-NEC, not a W-2. If you have any self-employment income, then you'd be eligible for a home office deduction. If your only income is W-2 and you claim a home office deduction, then your tax return won't stand up to audit.
the issue is between you and the company you work for.
The company is treating you as an employee not an independent contractor.
you could fill out IRS form SS-8 to have the IRS determine your employment status.
read the instructions
the iRS will request the company you work for to provide their version of the SS-8
from the two filings a determination will be made
don't expect a quick reply
https://www.irs.gov/pub/irs-pdf/fss8.pdf
Worker requests determination. If a worker has requested a
determination of his or her status while working for you, you will
receive a request from the IRS to complete a Form SS-8. In
cases of this type, the IRS usually gives each party an
opportunity to present a statement of the facts because any
decision will affect the employment tax status of the parties.
Failure to respond to this request will not prevent the IRS from
issuing an information letter based on the facts available to it so
that the worker can fulfill their federal tax obligations. However,
the information that you provide is extremely valuable in
determining the status of the worker