While we online teacher professionals love our jobs, being an independent contractor comes with its burdens–especially taxes. I’m not a tax professional, so I cannot give advice on the intricacies of the tax code, but I can tell you what I do for myself. My way isn’t the only way, and it may not even be the best way for you. I pay my taxes in the United States, so what I have to say might not apply to Canadians. For some, perhaps my method will give you an inkling of where to start when managing your finances for the following tax year.
Software vs. Human
I’ve done my taxes using software ever since they were first offered to the public. Therefore, it wasn’t too much of a jump for me to use it when I became a full-fledged independent contractor. I have nothing against going to an accountant to handle taxes. Personal service probably doesn’t cost so much more than software, and you receive just that–personal service.
So why do I use the software? Mainly because I know my way around the software. This may change in the future–perhaps next year I will go to an accountant. For me, it was very important that I learn how to file taxes myself. I wanted to know how being an independent contractor affects my tax burden. If I ever want to use an accountant, at least I will be more informed when I sit down with him or her.
Managing Deductible Expenses
The biggest hurdle in doing your own taxes is keeping track of your write-offs. I have a system–I’ve made myself a spreadsheet that has a simple formula. It adds up my:
- Other deductible expenses
I keep my receipts in one of those fancy decorative boxes. Having nice organizational tools always encourages us to use them! I buy most of my work supplies online. This helps to keep my purchases streamlined. Then, I simply save those online purchase invoices on my cloud drive in a folder marked “Tax Year 20__” At the end of the year, I copy the spreadsheet and move on to the next year’s expenses.
Tax software companies will often include budgeting tools as a freebie, so these may work better for you than a spreadsheet. Although I don’t use the software to add up my deductible expenses, I do use it to keep a tab on my tax burden. It links directly to any financial accounts I have, thereby automatically logging my income and expenditures. As long as you take the time to set up the software for yourself, it can be a very efficient way to make filing taxes easier in the following year.
What kinds of purchases go on my spreadsheet? My household utilities, cell and internet service, specialized clothing, all computer-related expenses (hardware, software, FeedbackPanda subscription, printer ink & paper, etc.), props and toys for classes, dry-erase markers, office furniture, and anything that gets exclusive use for my job gets logged on the spreadsheet. Your accountant or software should calculate the portion of utilities you can write off.
I also write off traveling expenses related to my online work. My VIPKid Journey expenses such as hotel and plane tickets were logged. So was my cruise meet-up for VIPKid teachers. Naturally, you should make sure the write-offs are IRS-acceptable for your personal situation!
Teacher Olivia discusses taxes for the online teacher
How Easy Is It to Do My Own Taxes?
It really depends on what you’re comfortable with, and how complicated your finances are. I work only as an individual/sole proprietor, and most of my income is from independent contractor work. Any other income I have might be from dividends and investments, or buying and selling stocks. I am also single (okay–now you know!) without children. Therefore, my tax returns are easier to file.
Many have jobs as a regular employee, or they have family situations that complicate taxes for them. Others own businesses, live abroad, have irrevocable trusts, or traded on foreign exchanges. All of these things require extra forms and due diligence. While tax software can guide you through these situations, sometimes the verbiage is not easy to understand. If you choose to file your taxes as a business, you should definitely get some expert advice, especially if you’re new to it.
Reputable nationwide firms specializing in tax preparation usually have seasoned agents. On the other hand, there are individuals who do not work under a firm and are preparing taxes for a fee. It must be said–please check on the person who is preparing your taxes, especially if you are paying him or her money. The IRS website lists tax return preparers for your benefit.
Tax software companies sell online help from tax professionals at an additional cost. Yet, at that point, I feel that going to a brick-and-mortar CPA would be worth it. Unless you plan on downloading all the forms from the IRS website, navigating the tax code yourself, and manually keeping track of your expenses, you will pay a pretty penny for some sort of expert assistance–human or machine.
Thank you for reading this article! If you’d like to know what I use for my tax-related expenses, you can direct message me on Instagram @ESLwithGabrielle.