If you become an independent contractor–and most work at home jobs consider you an independent contractor–your tax obligations change
You are now subject to the self-employment tax, which is slightly higher than the rate you pay with an employer. The current rate according to the IRS is 13.3%. You are also required to pay estimated tax each quarter if you expect to owe $1000 or more in taxes. If you don’t pay estimated taxes, you will have to pay an additional penalty. More information on making estimated payments can be found at the IRS web site
I hope to one day be able to just hand my paperwork over to a bookkeeper, but until that day arrives, I’m using TaxAct. It’s important to keep track of your business expenses, as some of them may be deductible. If you’ve set up a home office, you may be able to claim the portion of your home that you use for working. You should keep receipts in their own folder so that they are all in one place. If you have many receipts, you may want to get an accordion folder so you can organize them by month.
There are many accounting software programs out there, but I haven’t yet selected one. What accounting software do you like to use?
Obligatory Disclaimer: This discussion about taxes is GENERAL and is not a substitute for advice from a tax professional.