Paying Tax in the USA for Online ESL Teachers (Freelancer Tax Returns)

Paying Tax in the USA for Online ESL Teachers (Freelancer Tax Returns)

If you’re an Online ESL Teacher you may not have considered what you’re supposed to be doing tax-wise. Do you pay tax? How much? How much can you earn before they start knocking on your door?

Finding your feet as a freelancer is difficult enough without being bombarded with legal jargon and drowning under Form ABC with sub-section XYZ…

But this helpful guide will walk you through the essentials, and hopefully take some of the weight off of your shoulders.

This guide is for US citizens. I have previously written a tax guide for online teachers in the UK too.

How much can I earn before I have to worry about tax?

United States tax law expects companies to tell the IRS how much they’ve paid you since the last time you were taxed.

If you earn in excess of $400 from your freelance income then you’ll need to file a tax return. 

You’ll be required to fill these out either quarterly or annually. Each case is different, so it depends on your own personal financial situation.

What kind of forms are we talking about?

In a typical ‘nine-to-five’ job you’ll get a W-2 form from your employer. This tells you how much you’ve earned over the last year, and will give you some indication of what you should expect to be paying in tax.

As a freelancer you won’t receive a W-2. What you WILL get is a 1099 form.

The 1099 can come in two distinct ‘types’: the 1099-MISC and the 1099-K.

This is starting to get worrying, right?

Don’t panic. It’s actually much more simple than you probably think.

The 1099-MISC form is reserved for independent contractors. It needs to be filled out if you’re making more than $600 through being contracted over the last year. 

As a freelance ESL teacher, you might be receiving your payments via services like TransferWise, PayPal or Payoneer. If this is the case, then you’ll need a 1099-K form. 

The 1099-K form is for those who make above $20,000 over the year. It might sound like this doesn’t immediately apply to you, but in reality a great many companies are choosing to issue their freelancers with 1099-K forms regardless of how much they’ve earned.

Because of this, it’s in your best interests to keep EXACT records of how much you’ve earned, and where that money has come from. 

How To Keep Records Easily

The best way I've found to do this is using an accounting software such as Freshbooks. It's been an amazing away to organise my income and outgoings (which I've always been terrible at keeping track of).

You can grab a 30 day free trial of Freshbooks below – and you don't even have to enter any credit card details to get started:

Freshbooks Free Trial

Trial the accounting software for 30 days and help get organised your taxes and finances.

Using the Freshbooks free trial helps to support DigiNo to keep creating content just like this!

So is that it?

Well, not quite…

Self-employed and Freelance tax are split into two different taxes: ‘self-employed contributions tax’ and the typical ‘income tax’.

The self-employment contributions tax is made up of your Social Security and any Medicare payments. They can tax up to 15% of your freelance income through this method. 

So, now are we done?

Nope, not quite. The last thing to consider is how your State treats taxes.

Some States employ a State or Local Income Tax on your earnings. You’ll need to look into the tax brackets for your state of residence. 

An Online ESL Teacher based in Maryland might pay different taxes to someone in Texas, and those in Washington State might be taxed less than those in Michigan – don’t forget to check your own State. 

Anything else to keep in mind?

Yes, and this last bit is perhaps the strangest detail of everything we’ve discussed so far. 

Quite astonishingly, a large part of filling out your tax return is actually guess work… 

You’ll be expected to estimate how much you think you’re going to earn in the coming year, which will then determine the tax you pay for that year. 

In order to figure this out, you’ll want to have a look at the IRS Form 1040-ES. That’s the last form you’re going to see me mention, I promise. 

The amount you owe to the IRS is a quarter of the amount you ‘estimate’ you’ll earn. 

So what happens at the end of all of this?

In the final tax period of April 15th, you’ll be required to submit all the necessary forms. 

The IRS will then determine whether you’ve overpaid or underpaid – beware, if you’ve underpaid then you ‘might’ have to pay a penalty. But let’s be honest – they’re going to make you pay the penalty. So do what you can to make sure you don’t underpay.

If you can’t pay what you owe by April 15th, they’ll encourage you to set up a ‘payment plan’. This will incur ‘late fees’ on each payment made after that date though. 

Final Thoughts

Hopefully that wasn't too overwhelming and has helped set you on the path to getting financially organized. I wish I did it a lot earlier before my online teaching job expanded into more freelance work.

You never know how your online teaching or freelance career is going to evolve – so it's good to get some peace of mind early on! So do make sure to check out Freshbooks to keep organized.

And also the free automation tool IFTTT is something I used to keep all my spreadsheets, receipts and invoices organized without me even thinking about it. Check it out below:


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