Being a WAHM means you are a lot of things, all at once, but did you ever realize that would include accountant, too? Unless you're working from home as a CPA or another type of financial manager, chances are doing taxes only comes up once a year. But moms who freelance need to stay on top of tax calculations so the money is there when it's time to pay up.
A lot of moms wish they could work at home, but while it sounds like an ideal situation, it's as much a job and a business as heading out into the workplace--the difference being that more responsibilities are yours, like paying your own taxes.
Set Aside for Deductions
Some businesses allow employees to telecommute while staying on the books as an official employee. This means that state and federal income taxes, along with other required withholdings, are taken out of each paycheck. However, many jobs that moms can do from home do not take out required deductions. Does that mean you just got out of paying them? As if. The long arm of the law, AKA the Internal Revenue Service (IRS), expects you to be responsible for setting aside the right amount of tax deductions per paycheck, because they will expect you to pay your share come April 15 and they will find a way to take them if you don't.
You can opt to pay taxes quarterly or annually. While some people calculate every single penny for taxes, others set aside a flat total of about 30%, which goes into a separate bank account that no one touches, not even in a shoe emergency. With deductions and credits you'll receive from the IRS for working from home and having children, among other things, 30% is usually more than enough to pay what is owed for the reporting year.
Getting advice from a tax professional about the applicable laws on the federal and state levels is ideal, although there are a number of online resources you can also use to help educate yourself.
How do you know if you're responsible for paying your own taxes from income earned at home? If you're considered a "freelancer" or "contractor" – those are buzzwords that mean you are not an official employee (per the definition for tax purposes) and your company will not be taking deductions out for you. If you filled out IRS form W9, you are responsible for your own taxes and your company will be reporting your earnings. If you filled out IRS form W2 and are working from home, your employer is reporting your earnings and the amount of taxes they already withheld for the reporting year.
If you are still unsure, ask your employer about your tax status or start setting aside 30% of your earning just in case, so that you are not faced with a crisis when it's time to report your earnings.