Ah, the dreaded tax season. The good news is if your taxes are fairly straightforward, you can file your taxes online pretty easily. We’ve assembled a list of the best accounting and tax software for remote workers and digital nomads. Save time and stay on top of taxes – so you can get back to living and working from anywhere!
First, before you begin filing your taxes, you must be organized. Staying on top of your taxes throughout the year makes it easier to e-file and get your tax return (or know what you owe) more quickly.
Organizing your taxes
A simple way to organize your taxes is to keep a spreadsheet or notes of major purchases throughout the year. I use Google Sheets to list out expenses and income and any major purchases related to business. This helps me not only with taxes but keeps me thinking about my budget, managing expenses, etc.
I separate income: business income, 1099 and/or W2 income, rental income and expenses: maintenance/repairs, software and tools, and so on. Any time I have a major purchase or repair, I got to the sheet and jot it down so I don’t forget. As a digital nomad and business owner, you need all the tax deductions you can get!
Tax filing for W2 Employees
If you don’t have a business and are a W2 employee, filing taxes online will be straightforward. You will need to get a copy of your W2 from your employer. Companies may use a service like Gusto or ADP for processing payroll.
You may also use a service like Expensify for reimbursements. Note that if the company does not report the reimbursements, you may not need to either. Instead, you can take advantage of the $1,800 / year allotted standard deduction.
Tax filing for Independent Contractors (1099)
If you are an independent contractor you will have self-employment taxes. This means you will have more tax deductions you can consider.
It’s nice getting a large check for your total hourly rate without taxes deducted. However, you always need to keep in mind paying taxes – or you can quickly end up behind with Uncle Sam.
For some reason, I always choose to learn the hard way. This was true in terms of getting behind on taxes. “Leap and the net will appear” – while motivating, it does not apply to taxes.
So, now, I generally subtract and set aside 30% from the total amount received for paying the IRS. I know, it’s hard, when you could be investing in Bitcoin instead. But, pay now or pay later. Trust me.
Luckily, with deductions, you can reduce your percentage owed. But not completely.
An important part of tax preparation for your freelancing business is keeping your receipts and tracking your expenses. Luckily, there’s a solution to paper receipts – Expensify.
Keeping track of your receipts as you go will save so much time and hassle later on. With Expensify, you can keep track of your own receipts, send your expenses for reimbursements, or reimburse business expenses.
Best Accounting Software for Remote Workers & Digital Nomads
To keep more diligent track of your expenses, you’ll want to move from spreadsheets into accounting software. Some accounting software also allows you to file your taxes. But for simplicity, we’ve first listed the best accounting software.
Benefits of Accounting Software
If you’re working remotely, you probably already have a slew of apps/software you use each month for your job or online business.
So it makes sense to simplify your life and go digital in all areas, including accounting software. No paper receipts!
Some of the benefits of accounting software include:
- Linking your bank accounts
- Keeping everything in one place
- Be prepared for tax season
- Know what you’re owed or the amount you’ll pay taxes
Note: Something I also learned a little late – never co-mingle your funds. Always have a separate account for business and personal. This makes filing and reconciling sooo much easier. Recently I changed from having all my accounts at Bank of America (I originally did this, even with high fees, for international reciprocity) to Mercury. Mercury is very simple to set up – all online – and easy to use, unlike traditional banking software.
An industry leader for a reason, Quickbooks makes it easy to set up your tax filing system. They have options for simple tax prep or more in-depth tax reporting.
Quickbooks Self Employed
If you are self-employed and want to take advantage of all your deductions, then QuickBooks Self-Employed is the best accounting software for you. If you have US or foreign employees, QuickBooks also makes it easy to manage payroll tax filings.
Another market leader, quickly on the tails of Quickbooks, Xero allows business owners to easily track expenses and differentiate between personal or business-related transactions. Xero makes it easy to reconcile your taxes by setting up rules. An example of a rule might be to group all gas stations into one category. This makes it easy to quickly reconcile the name and category of the expense.
Xero has a more difficult learning curve than Quickbooks, but it’s one of the best accounting softwares there is. A lot of companies and CPAs are switching to Xero. I find Xero to be more complicated in terms of setup, but easier to use once you get going.
If you don’t want to touch accounting and you prefer someone else to manage it for you, there’s a solution! Bench.co is a startup that specializes in accounting software and also tax filing.
Bench has a managed service along with its software. Meaning, along with having some of the best accounting software, they also provide you with a team of accountants. An added bonus is that you can ask them for advice at any time. Not the cheapest, but if you prefer to have someone else manage your accounting and books – Bench is a great option. Accounting, tax filing, and software all-in-one.
You can get a no-obligation trial and call with a Bench representative to learn more.
Best Tax Filing Software for Remote Workers & Digital Nomads
Remote workers and digital nomads can use tax filing software to file tax returns without having to be in one place (yay, work from anywhere!). For remote workers, tax filing can be challenging. Tax software is an effective solution to your tax problems. Tax software provides security, convenience, and ease of use at a low cost and include:
- Basic tax filing with tax deductions
- Beginners to tax filing online without any tax knowledge or experience
- Free tax return filing and tax support throughout the whole process
- Basic tax filing with tax deductions
Let’s take a look at a few.
Free Tax USA
Started by a CPA in 2001 and IRS-approved, FreeTaxUSA has become one of the top tax filing software. It’s the best tax software for tax filers with simple tax returns. And, just like the name says, you can use FreeTaxUSA 100% free for your Federal returns.
FreeTaxUSA also guarantees that you’ll get the maximum return if you use their software. Not bad for free!
There are two editions – Free and Deluxe.
FreeTaxUSA – Free Edition
The free edition is easy to use, unlike other free tax software, and good for novices with simple returns.
You pay nothing for preparing and e-filing your federal return, and up to $14.99 for each state filing. FreeTaxUSA includes IRS forms including Schedules A, B, C, D, E, and K. These forms cover a wide range of situations and complexity, like online business and freelance income. Also deductions related to your home office.
All of your data is stored in the cloud. This makes it super easy to come back each year and use your previous year’s data. This is a huge time saver for tax preparation. You can also import from other tax programs like TurboTax, TaxAct and H&R Block to get your data.
The free edition has great customer support and typically produce a response within 24 hours (even on weekends). All help is provided by email. If you want to receive priority support, which you may need for more complicated taxes or to avoid an IRS audit, you need the Deluxe edition.
TaxFreeUSA – Deluxe Edition
If you’ve ever been audited then you know the nightmare of having to go back through every single receipt, deduction, claim, form, and so on. HR Block says “On a scale of 1 to 10 (10 being the worst), being audited by the IRS could be a 10”. So, yeah, don’t get audited.
Benefits of the Deluxe edition include:
- In-house Audit Assist program that provides access to audit specialists
- Priority support, including Live Chat during business hours
- Unlimited amended tax returns
The Deluxe Edition costs $6.99 for federal returns and $12.95-$14.99 for state taxes. The main advantage to the deluxe plan is the audit assistance and live support. Taxes are not easy, so having someone on your side can really help. Especially for only $6.99.
Did I mention that they guarantee you’ll get the maximum refund?
I’ve listed TaxSlayer because it’s the best tax software for freelancers or self-employed people. Typically this software is for digital nomads and freelancers who have some experience filing their taxes online.
TaxSlayer has some of the cheapest prices and they offer a free tax filing service.
Similar to TaxSlayer, TurboTax is another good option for people who have some experience in tax preparation. Both companies offer cheap prices, but I personally like how TaxSlayer helps throughout the entire process.
TurboTax tax filing software makes it easy to file your tax returns from anywhere as long as you have internet access.
H&R Block Tax Software
H&R Block tax filing software is for those who want the most comprehensive and accurate services possible, without having to pay hugely expensive fees.They also have a network of over 10,000 office locations across the US.
H&R Block tax software can find deductions that other tax services might not be able to. Deductions can save you thousands of dollars in taxes owed.
TaxACT is tax software for people with simple tax returns who cannot or do not wish to file online. But, still need an easy-to-use program that will guide them through the whole process step by step.
A tax return can be complicated for freelancers, remote workers and digital nomads with investments or rental properties. If you’re living in a foreign country or have foreign accounts, making worldwide income, you may want to consider hiring a firm. Tax firms help reduce your risk.
Jackson Hewitt allows you to file in person as well as online – by yourself or with a tax professional.
Tax preparation fees vary depending on what you need. If you want to avoid being double taxed, avoid paying too much in capital gains, know how to deal with foreign taxes (and U.S. taxes), foreign assets, foreign tax credit, foreign earned income exclusion, and other complicated matters – Jackson Hewitt has the expertise to help you through these things.
It’s not the cheapest, but having a tax advisor / tax expert for a complicated tax situation is worth the money spent.
Liberty Tax is similar to Jackson Hewitt in that it has both online options to file taxes as well as a network of local offices around the country.
I personally have had a tax advisor from Liberty Tax for years, and she owns two local offices. Many digital nomads or people working remotely abroad can benefit from extra tax advice. It is relatively easy to file online. However, when you have income from remote work in multiple states or multiple employers, property tax, health insurance, stocks, rentals, capital gains, various financial accounts and properties, multiple online businesses with remote employees – you really need a tax expert.
With Liberty Tax, you can file online, request a virtual tax pro (which I love and great for American digital nomads) or go into an office location.
Taxes are complicated, full stop. If you are a digital nomad, work remotely / work abroad, are living abroad and have multiple businesses and/or assets, it thickens the plot. Having the best accounting and tax software in your toolkit will keep your books clean and your taxes a breeze.
The first step to being prepared is to stay organized and leverage a bookkeeper and/or bookkeeping software. The best accounting software is one that will scale with your business. If you want to go-it-alone, try Quickbooks or Xero. If you want a managed service, check out Bench.
Having tax software to file online is important when all you do is live and work from anywhere. FreeTaxUSA is the best tax software for free filing online. If you want to seek the advice of a tax expert, then you will also want to look at Jackson Hewitt or Liberty Tax. Bench also offers tax filing advice and support (and, like you, is remote). Having someone to help advise you on your taxes while also filing online can save you many headaches during tax season.