It’s that time of year again…or is it?
From what I’ve read about how to pay self-employment taxes, us online teachers shouldn’t leave it all until the last minute and file when everyone else does!
The requirements are a bit different for digital nomads working independently or in contracted positions for other companies (think VIPKID), and it’s important we know when we should file, how much we’ll need to pay, and different ways we can save a bit by deducting ‘business expenses’.
While it’s always best for online teachers to work with an accountant to make sure they’re filing their taxes correctly, we’ll get you started on the right path with our overview on how to pay self-employment taxes.
When Do Online Teachers File Self-Employment Taxes?
What do you mean ‘When’?! It’s tax season now, isn’t it??
Actually, the regulations are different for self-employed or contracted online workers who expect to pay over $1000 in taxes in a tax year after deducting federal income tax. These individuals-who usually receive Form 1099-are required to pay quarterly taxes four times a year.
Those online teachers who receive a W-2 from their university or institution have taxes withdrawn throughout the year by their employer and do not need to pay quarterly taxes.
Don’t panic if you think you might be behind, but do read up on how to file taxes with IRS form 1099-MISC. You might be hit with a 5% penalty for each month your payment is overdue, but it won’t exceed 25% of the total taxes owed. Late payments on quarterly taxes can also result in a $100 fine. Every dollar counts for online teachers, so make sure to get them in quarterly so you can avoid the fine!
Here are the deadlines as listed by Form 1040-ES Estimated Tax for Individuals on the IRS website:
1st Quarter due …………….. April 15, 2018
2nd Quarter due ……………. June 15, 2018
3rd Quarter due …………….. Sept. 15, 2018
4th Quarter due…………….. Jan. 15, 2019
How Much Do I Owe in Taxes as an Online Teacher?
The current rate for self-employed workers is 12.4% for social security and 2.9% for Medicare, so you’ll pay a total of 
15.3%.
It’s important to note these quarterly taxes take the place of an employer withdrawing throughout the year. The way you choose to estimate and withhold your taxes, the amount taken out for any other employment income, and the amount of income you earn will influence the amount of estimated taxes you need to pay throughout the year.
You can use Form 1040-ES to determine this, or get help from an accountant (see below), but the general rule of thumb is to save 25-30% of your paycheck. Set it aside in a separate bank account manually, or set up an automatic recurring transfer from one bank account to another so you don’t spend it.
Remember those teachers who earn more than $400/year from all self-employment sources, and your client (VIPKID, for example) is required to provide you with a 1099-MISC form if they’ve paid you $600 or more during the year.
Save Money: Online Teacher Tax Deductions
Before I talk about the expenses you can deduct to save yourself some hard-earned cash, let me give you a quick tip:
If you have the time and money to meet with a professional accountant, especially if you’re friends with one, you’d be amazed at the ways they can help you save money. This is useful if you’ve forgotten to pay quarterly or you’ve messed up some other way throughout the year. I was able to save a ton in the ‘deductions department’ by doing this. So don’t always take shortcuts by using online platforms if you can help it.
Now, on to deductions for online teachers. 
Unfortunately, we’re not eligible for the Educator Expense deduction if we don’t work for a traditional K-12 school. But we can still make deductions like:
- Teaching supplies
- Business supplies
- Most requirements for teaching online, including props, laptop, your headset, and uhh your internet of course.
- Possibly your ‘home office’, but we’ll let you check the IRS website for information on their Home Office Deduction.
- Travel?! This once gets dicey. Again, check with a tax professional, but if you traveled for your job, it might work out. Think travel expenses related to traveling for certification or between your home and work. Again, check with the IRS website.
Now, it’s a smart idea to keep your receipts. This will make your life and your accountants life easier, should you chose to use one. It’s also best to keep your personal finances separate from your business expenses:
Set up separate bank and/or Paypal accounts to do this.
If you don’t have your receipts, don’t worry too much about it. Your accountant might still be able to help you out.
But in this digital age, just snap shots of them and save them to your phone, a designated folder, or to a receipt-tracking app like Shoeboxed so they’re ready to go come tax time.
Bonus Deduction: The Foreign Earned Income Exclusion (FEIE)
Many of us teach online and travel.
But did you live outside of the US for 330 days or more in the past year?
You might qualify for the Foreign Earned Income Exclusion on self-employment income!
Now, this is far from the only requirement. Here’s a brief description from the IRS about the FEIE:
If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income up to an amount of your foreign earnings that is adjusted annually for inflation ($92,900 for 2011, $95,100 for 2012, $97,600 for 2013, $99,200 for 2014 and $100,800 for 2015). In addition, you can exclude or deduct certain foreign housing amounts.
Due to the numerous qualifications and the confusing nature of determining your tax year vs a calendar year, I’d suggest using the IRS Interactive Tax Assistant to see if you qualify!
Teaching Online and Paying Taxes: Not So Scary
It might seem difficult, but you’ll be all set once you get a good system going.
I can’t recommend meeting at least once to establish this with an account. This was all it took for me, and I can now handle my own taxes for the coming year.
Remember these tips:
- Save receipts and figure out your eligible deductions
- Create a separate bank account and save about 25% for tax payments
- See if you qualify for the Foreign Income Exclusion and
- Remember to pay quarterly-mark your calendar!
The last thing you want is for Uncle Sam to dip his hand even deeper into your pocket to collect fees when you’ve missed the deadline after working so hard teaching throughout the year!
Hi! If I work as an online teacher and live in the United States; would I have to pay United States taxes AND China taxes?
Hi Lexi!
You’ll file your taxes as a 1099 contract employee to the US as you’re a resident there, but you won’t pay taxes to China.
Cheers!
Jason
so if we qualify for the FEIE “living abroad while teaching online for 330 days of the year” and taking into account deductions for office supplies internet etc, realistically what percentage of your income do you end up paying in taxes. The self-employment tax is 15.3% but taking into consideration the FEIE and other directions what percentage will we end up paying ballpark? Like 10%?
Hello!
I’m from the US working for an Online English Teaching company. I’m currently living in Spain and I’m not sure if I have to pay taxes here in Spain or the US, do you have any idea?
Thanks!
Hello from Madrid, Ana!
First, the necessary caveat: I can’t offer legal tax advice and every situation is different.
With that out of the way:
How long do you spend outside of the US? Check this IRS link to see if you qualify for the Foreign Earned Income Exclusion: https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion
If not, you should receive all the paperwork from your company (1099 etc. I’m assuming) and pay the US.
Let me know if you have any followup questions!
– Jason
Hi Ana,
Would love to learn more about your situation since my wife is dealing with something similar. Are you open to sharing your experience with us?
Thanks,
Oliver
I’m an American currently living in Germany and I tutor math online (not through any company just me). I’m paid in US Dollars straight to my PayPal account (my clients are students living on an American base in Germany). So it’s all kind of complicated and I would appreciate any advice on how to go about taxes for this. I also am married to a German and teach part time at a regular German elementary school, so that’s all separate.
Hi from Spain, Lauren!
I’m going to comment a similar answer here as I did to Ana:
First, the necessary caveat: I can’t offer legal tax advice and every situation is different.
With that out of the way:
How long do you spend outside of the US? Check this IRS link to see if you qualify for the Foreign Earned Income Exclusion: https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion
I’ll also follow u with email to give a slightly more detailed and opinionated response, as each situation is different :).
Cheers!
– Jason
Hello, I live in the Philippines, and work for a Chinese company. The payment I get for teaching online is sent to my Wife’s account, a Filipino bank account as I don’t have a US bank account anymore, I am wondering what I should do exactly?
Steve
Hey Steve,
Very cool, would love to get over there!
I can’t really give specific tax advice, but how long do you stay out of the US? Have you checked into the Foreign Earned Income Exclusion?
Here’s the link: https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion
It’ll depend on that, on whether you get a 1099 as a contracted position vs an employee of the Chinese company, and probably some other factors.
There’s also this: “Any U.S. citizen with foreign bank accounts totaling more than $10,000 must declare them to the IRS and the U.S. Treasury, both on income tax returns and on FinCEN Form 114.” But if it’s into her account and not under your name, maybe not an issue.
If you can’t find anything solid Googling online or searching through the IRS docs, there’s always https://www.greenbacktaxservices.com/ to help out :).
Let us know how it goes!
Cheers,
Jason
Hello,
I am a US citizen living in Taiwan the full 365 day year and teaching online English to Chinese students in China. I am concerned I do not qualify for the FEIE exemption because my school considers me an independent contractor, and pays me back in the US into my US bank account. Many online schools are now refusing tp pay expats into their Chinese bank accounts or foreign accounts and insist on paying them only to their US bank account from their US payroll branch in the US where none of the work is taking place or being conducted I’m guessing because of sanctions/threats from IRS? No idea… Anywho what i’m concerned about is this….”Self-employment income: A qualifying individual may claim the foreign earned income exclusion on foreign earned self-employment income. ” (taken from the IRS site) Is my income considered “foreign” earned income if my income is being paid to a US account back in the US? This doesn’t seem fair if so since i’m living outside the US and The work is taking place outside the US and my clients on the receivers end are based outside the US. Thanks in advance Ryan-
Hey Ryan,
Great question!
So first the usual “I am not an accountant, so these are just my own opinions” notice.
Here’s just the way I see it using my own situation as an example:
I live in Spain. If I were to register as autónomo (self-employed) with a business, tax ID number here, etc. and earn money through that (not VIPKid, but pick a different type of work) then this would qualify for the self-employment scenario you describe. I’m not employed by a foreign company, but I am earning this money with my business registered in another country as a self-employed individual, paying taxes to that foreign country. This is what many friends do.
But because, as you mentioned, VIPKid pays from their US branch and the Payer’s name on our 1099 forms uses their US address, despite our own physical location and the location of our students, we don’t qualify for the exemption.
It seems there are, however, many deductions you can include when filing – I’d talk to an accountant about that if you can.
Totally see your position, and I’m sorry I can’t be of more help!
– Jason
Hello,
I only made 502.00 via VipKid, so they won’t send me a 1099-MISC. Now I feel stuck. How do I proceed from here?
Hey Patrice,
I’m not an accountant so here is the legal protection safety notice thing :).
It’s my understanding that you still file your personal income taxes on a 1040 form and mark this amount under a section like “Less Common Income/Miscellaneous Income/Other Reportable Income”.
It doesn’t get taxed the same way but gets reported.
I hope that helps!
-Jason
Hi! I’m in the U.S. working through GOGOKID. I made less than $12,200 in 2019 (income for those not required to file) $1,200 of my income was from online teaching (for China). Do I have to file?
Hey Heather,
Legal notice covering myself I am not an accountant etc. etc. 🙂
I always file. Paying the taxes is one thing, filing so you’ve covered yourself and there is a record of this income is another.
Since that $1,200 is above the threshold for them to issue a 1099, you’d receive one and might want to report it.
But that’s just my understanding of it, I’d ask an accountant or continue researching to see what others say.
Cheers!
-Jason
Hey Jason,
Hope you don’t mind me picking your brain since you live in Spain as well. My wife provides classes via Skype, mostly to people in the US, but not exclusively. She is technically a freelancer since she is not employed by the company which provides the clients and pays her. They do not even give her a 1099, though they could. She is paid in USD to a US bank account and she paid her quarterly taxes in the US as required.
However, our tax professionals who did our US income tax said that since she carried out these services while living in Spain, they qualify for the FEIE and were handled as such in our US return.
My concern is that she is not an autonomo here. Since her work is in the US and we assumed she’d be taxed in the US, we did not think she needed to become one (sounds like you have a similar set up). However now that the income was excluded in the US, we are aware that we need to pay taxes to Spain, but don’t know the best way to go about it since she is not an autonomo.
Hello! I’m living in Spain as well at the moment, and I don’t plan on going back to the US any time soon. I’m an English teacher here in Spain, and have been doing my taxes here for the past 3 years and not in the US. I’m looking into teaching online using palfish, and would like to know if I would have to file in Spain or in the US? I think teaching online would be a good opportunity/side job in the summer and such, but I don’t want any issues.. what should I do? Thanks in advance!
Does anyone have the tax id number for Gogokid? I need it to help someone file.