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 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!

Best Tax Software for Remote Workers and Digital Nomads

First, before you begin filing your taxes at home or in foreign countries, you must be organized. Staying on top of your taxes and business activities throughout the year makes it easier to e-file, get your tax returns (or know what you owe) more quickly, avoid missing tax obligations, and protect your financial accounts from double taxation.

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.

Tips for organizing your taxes

Using a Google Sheet helps me not only with U.S. taxes but also with foreign taxes and other taxable income especially while living abroad. It also guides me in managing my budget, particularly when it comes to health insurance options, state taxes when I’m on the move within the country, and even my tax benefits.

I separate income: business income, 1099 and/or W2 income, and rental income. I also separate my expenses: maintenance/repairs, software and tools, and so on.

Any time I have a major purchase or repair, I go 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.

Software for W2 Employees

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 to consider.

It’s nice getting a large check for your total hourly rate without taxes deducted.

However, working remotely as digital nomads also means that you need to be conscientious of filing taxes and tracking your worldwide income (from foreign assets or foreign taxes paid) – or you can quickly end up behind 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 tax deductions, you can reduce your percentage or tax bill owed. But not completely.

Accounting Software for Remote Workers and Digital Nomads

To keep more diligent track of your expenses, you’ll want to move from spreadsheets to accounting software. Some accounting software also allows you to file your taxes while monitoring your bank account. 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!

Benefits of accounting software:

1. Linking your bank accounts
2. Keeping everything in one place
3. Be prepared for tax season
4. 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.

List of the Best Accounting Software

Quickbooks

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 software for you.

If you have employees, QuickBooks also makes it easy to manage payroll tax filings.

Xero

Xero is another market leader, quickly on the tails of Quickbooks. Xero allows business owners and digital nomads 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.

Bench

If you don’t want to do accounting and prefer someone else to manage it for you, there’s a solution. Bench.co is a startup that specializes in accounting software and tax filing.

Bench has a managed service along with its software. Meaning, along with 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 – Bench is a great option.

Expensify

An important part of tax preparation 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.

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, filing taxes, keeping track of foreign taxes paid, generating a foreign bank account report for foreign accounts, or just checking for potential double taxation can be challenging.

Tax software is an effective solution to most of the problems involving filing taxes. Tax software allows digital nomads to fulfill their tax obligation by providing a secure, convenient, reasonably priced, and easy-to-use platform.

Benefits of tax software:

• Basic tax filing with tax deductions
• Beginners can file taxes 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 produces 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 of 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?

Try FreeTaxUSA.

TaxSlayer

I’ve listed TaxSlayer first 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.

TurboTax

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

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.

Jackson Hewitt

Tax obligations can be complicated for freelancers working remotely 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 and pay taxes 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 your annual income being double taxed, paying too much in capital gains, social security tax, and corporate tax, as well as know how to deal with foreign taxes (and U.S. taxes), tax treaties, 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 for a complicated tax situation or tax bill is worth the money spent.

Liberty Tax:

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.

This is particularly convenient for digital nomads and remote work employees who need help with their diverse earned income.

I personally have had a tax advisor from Liberty Tax for years, and she owns two local offices.

Many digital nomads or remote work employees abroad can benefit from extra tax advice. It is relatively easy to file online even if you’re in a foreign country.

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 is great for American digital nomads) or go into an office location.

Conclusion

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 tax software to file online is important when all you do is live and work from anywhere. FreeTaxUSA is the best 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. Having someone to help advise you on your taxes while also filing online can save you many headaches during tax season whether you’re filing U.S. taxes or foreign taxes.

When working remotely, whether required or by choice, there are many things to consider and understand where taxes for remote workers are concerned. Things like: where you live, type of employment contract such as remote employee or independent contractor, state laws where you live and where the company is headquartered, write-offs, tax implications, eligibility, tax liability, and so on. This article provides tax advice for remote workers and digital nomads so you can save money and have peace of mind.

70% of people worked from home during Covid. Among them, 50% want the setup to turn into a permanent basis. That is, now that they’ve worked remotely, they no longer want to step foot in their employer’s office.

Remote work is the new norm. So how does this affect your personal income taxes?

In 2014, the Taxpayer Advocate Service estimated that there were about 10 million people who worked from their homes in some capacity.

Digital nomads and remote employees have been able to file their own taxes since the Tax Reform Act of 1986.

Remote work comes with tax benefits including monthly deductions.

What are some tax deductions for remote workers?

Travel expenses

In order to be able to deduct travel expenses from your taxes, a bit of handy tax advice for remote workers is to create an itemized list of the date and mileage on gas receipts. Add up how much money you spent traveling and take that number as a deduction on your return.

Hardware and software purchases

The tax policy for deductions also covers cell phone purchases, subscriptions, advertising, memberships in associations, charitable contributions, and legal fees related to work requirements (such as tax advice and contracts).

Business meals, lodging, and entertainment

You can note entertainment expenses to be deductible when they are “directly related” to, or associated with, an employee’s job duties.

Home office space

Remote employees can also include home office space, business cell phone plans, and Internet service. The tax code allows employees to deduct expenses related to using a section of their house as a home office, which can save you up to $1800 in taxes per year. Tax deduction rules for a home office are not limited to the space you use specifically for your business, but also cover supplies used in that area.

Deductions for travel and business supplies can be used as a pretax benefit if they are deducted before your income is taxed. This applies to taxes for remote workers and not independent contractors.

Where do you pay state taxes if you work remotely?

For a remote worker in the U.S., it’s a common, but important question. Tax laws are changing quickly to adapt to the growing number of workers working remotely – meaning that the local tax laws tend to vary in different states.

Tax is currently assessed by the state where the person works, not the state where the person lives.

Generally, your income tax is based on where you’re physically located when earning the income. For example, your job’s office is in state A, but you’re living and working full time in state B. You’d pay income and all other taxes to state B.

Avoiding Double Taxation – Important tax advice for remote workers

Rules due to the pandemic have changed quickly. It can definitely be challenging figuring out where you owe taxes.

To avoid double taxation, it’s very important to clarify your remote work arrangements and understand the extent of your tax liability. Keep in mind that different laws apply, with some states requiring state income tax in their own tax code.

Others follow the convenience rule, while some require a reciprocal agreement between nonresident employees and the company in terms of handling tax notes.

Just because you’re complying with the tax law of New York doesn’t mean you should no longer check if you owe taxes if you’re working in San Francisco.  

You should have your employer withhold taxes from the state in which you physically reside. Otherwise, the state in which your company is headquartered will withhold taxes.

If you work remotely and live in one of these states (Arizona, Washington D.C., Nevada, Tennessee, or New Hampshire), your employer will withhold taxes on some of your income.

For example, I live and work in Washington state but I was employed by a company headquartered in Indiana. I paid a portion of my income earned to Indiana and paid no income tax to Washington, as it is one of the states without an income tax.

States without income tax include:

• Alaska
• Florida
• Nevada
• New Hampshire
• South Dakota
• Tennessee
• Texas (no personal income tax, but there is a corporate tax)
• Washington

However, if you are working remotely for an employer outside of one of these states, even if you are physically living and working in one of the states listed above, you will pay a portion of your income tax to where the company is legally headquartered.

If you reside in any other state that offers income tax incentives for telecommuters, employers may report it as regular wages. This means less taxes withheld. These incentives include: Alabama Tax Exemption Program and Mississippi Tax Credit (for employees living 50+ miles outside of the area).

So unless your employer is following your residency tax requirements for remote workers or one of these states offers tax exemptions to employees who work remotely, then chances are good that the company will not be withholding taxes from all of the income you earn. Tax exemptions for remote workers often require employees to work at least 30 days out of the year from their home state.

Taxes for Remote Workers – Convenience States

The Tax Cuts and Jobs Act not only brought tax reform but also an additional option of filing your taxes as a nonresident of the state where you work.

If you live in one of these five states (Arizona, D.C., Nevada, Tennessee or New Hampshire) and work remotely for a company headquartered in one of these states, you will file your tax return with the state where the company is headquartered. Tax withholding for employees working remotely, even if you are living in another or a different state, will be sent to that state. Meaning, no state income tax is paid twice.

By working remotely, you may be entitled to tax relief, but it is up to you or your employer to file and claim such relief. This depends on where you live and the laws in place within that state. It’s important to notify your employer where you’re living so it can withhold taxes from the correct state.

If you live in a state with income tax and work remotely for a company outside of one of these states, chances are good that you will be required to pay taxes in some form like personal income tax or state tax return.

Where do I file my taxes if working outside of the US?

Taxes for digital nomads can be difficult to navigate, especially for expats working or living outside of their home country.

When you are working remotely, i.e. living outside of your tax-home country, the first thing you should do is check if it’s necessary for you to file taxes at all. This is especially true if you are earning less than the minimum income required for taxation in your host country.

If you are earning income in multiple countries, tax treaties between countries usually prevent double taxation of the same income. However, it is still possible that you will have to pay some taxes in multiple places.

Tax treaties often also contain information about specific deductions (such as for housing). These are limited to the tax rate of your tax-home country or host country where you work.

Wherever you earn your income, the process to file taxes stays very similar. Tax rates vary by country and place of residence, but if you are earning money in any country other than the US, the general consensus is that remote employees pay taxes where they spend most of their time working.

How to Handle Tax Returns as a Digital Nomad

Remote work has many perks. The biggest one is that you can pretty much live and work from anywhere in the world online — and there are no limits on where you can work. While this may be ideal for some, tax season can be a nightmare for others.

Taxes for Digital Nomads

When it comes to filing your taxes as a digital nomad, these are the three critical things you need to know:

1) You will have to file as “self-employed.” This does not mean you have to actually run a business. In order to claim remote work as your profession, you must be earning an income working at least part-time from home.

2) You are not able to claim housing deductions if you are staying with friends or family during tax season. The Tax Cuts and Jobs Act has said that people who live in the homes of others for free do not qualify for deductions while working remotely. Tax deductions are also not available to those who use co-working spaces or rent out a home on platforms such as Airbnb and VRBO. 

3) Tax deductions for housing and transportation still apply even if you’re living in another country. Taxpayers can only claim deductions when living outside their home country for 330 full days during a 12-month period. If you work 183 days (half the year) in another country, you are subject to taxation laws and must file tax returns in both countries.

Where can I get help and tax advice for remote workers and digital nomads?

Tax Software

While software cannot inherently give advice with respect to taxes for remote workers, it can help save money and speed up your tax filing. Using one could do wonders for your own convenience.

KeeperTax – finding tax write-offs

Use a service like KeeperTax – for independent contractors, entrepreneurs, and remote workers to find hidden tax write-offs that can save you money. They’ve saved their members over $40 million and their average member sees an extra $6k annually in savings.

Quickbooks – accounting software

One of the best accounting software used today with millions of customers worldwide. Quickbooks allows you to upload your previous year’s tax return information. This makes filing taxes easy for the next calendar year. Tax advice articles are available on their website. There’s also an accountant directory to help you look up accountants near you that specialize in tax preparation.

TurboTax – easy-to-use tax filing software

TurboTax is best for people who are not accountants or tax lawyers using sophisticated strategies. Turbo Tax offers tax advice articles that help guide you through common questions on your tax return submission. Tax filing with TurboTax is easy and a great way to get started with filing taxes. For more advanced or complicated taxes may want to look into either H&R Block software or TaxAct.

See Best Tax Software for Remote Workers

Seeking out Tax Professionals

Tax professionals in the US who specialize in remote work are gradually becoming more common. Hiring a tax professional could be a lifesaver for any remote worker. A tax professional can ensure that you’re up to date on the tax code requirements, avoid tax consequences, and even help you find ways to cover lost revenue.

A good tax attorney is just as important when trying to find a trustworthy accountant to handle your tax returns. Tax attorneys will be highly familiar with the unique tax laws of every tax department, Supreme Court decisions or even just temporary rules that could alter the tax foundation, and income exclusion benefits on a federal level or abroad.

Tax professionals will also be able to keep your taxes organized throughout the following year. Staying up-to-date makes sure everything goes smoothly with your taxes when April comes around. They are also capable of making sure you are getting all the benefits that are available to you as a remote worker.

Taxes for Remote Workers and Digital Nomads – Conclusion

Working remotely in the US or even outside the US as a digital nomad certainly has its benefits. Freedom to travel, less of a commute, and more time with family, to name a few.

As the laws change to keep up with the rise in remote work, in large part due to the pandemic, there are tax advantages – and disadvantages to be aware of.

As the laws are constantly in flux, seek out a tax professional in your local area who knows the tax rules and how to file state income taxes for remote workers. For tax filing, you can use tax software for remote workers or hire an accountant. Tax advice for remote workers is key in ensuring you are aware of the tax laws surrounding remote work.