You have complete control over your fate as a freelancer. You may pick and choose your assignments, skip mind-numbing daily traffic delays, and work at your own leisure. You must also pay your own taxes, which may be a daunting task. It also needs some expertise, otherwise you risk overpaying the South African Revenue Service (SARS).
We’ve put up a list of guidelines for freelancers to help you manage your taxes efficiently and effectively, while still remembering to claim appropriate deductions. Please bear in mind that this is not professional tax advice; contact Outsourced Finance and our team of qualified accountants will be able to help you.
Register as a provisional tax payer
You must register as a provisional taxpayer since you do not have a regular monthly paycheque. This means you must calculate your yearly tax and pay it twice a year to SARS.
The first payment is due on August 31st, and the second payment is due on February 28th yearly. But there’s a catch: depending on the assessment for that tax year, your projected tax due must be within 90% of the actual amount you owe. Fortunately, you can make a third optional payment before September 30 to keep your total tax payment within the allowed limit. If you don’t take advantage of this window of opportunity, you’ll have to pay a penalty.
Set up money for bi-annual tax payments.
We urge that you save aside a portion of your income each month to prevent the shock of having to pay two huge sums to SARS each year. You can keep it in a money market or an interest-bearing savings account and use it to pay your taxes when the time comes.
Keep a record of your work expenses
It is prudent to keep a record of all of your work-related spending. Make a self-calculating excel spreadsheet that includes all of the expense categories, such as phone, mobile phone, office supplies, website overheads, entertainment, and so on. Make a column for your monthly revenue and subtract your expenditure from it. In the blink of an eye, you’ll have a running tally of your taxable income. You’ll need all the facts and statistics to include on your tax return because company costs are tax-
Take advantage of tax deductions for home offices
As previously stated, some home office expenditures can be deducted from your yearly tax payment. All office supplies, communications tools, furnishings, salary, and the section of your house you use purely as a home office are all deductibles. To figure out how much your home office deductible is, you’ll need to know how big your house is and how big your office is in square meters. You’ll also need to figure out how much you pay for rates, energy, and water on a monthly basis.
Take advantage of your medical tax credits by filing a claim
Medical tax credits are available to those who contribute to a medical assistance plan. You can deduct a portion of your monthly payment as well as a portion of your out-of-pocket medical expenditures.
The deductions must be made from one of the two provisional tax payments on a yearly basis.
On the IRP6 form, which is due in August or February, you will have the option of filling out the deductibles. If you fail to claim your medical tax credits for the year, you may be penalised.
Paying taxes as a freelancer doesn’t have to be such a dreaded task. If you don’t want to handle your finances yourself, don’t be afraid to seek professional advice. By outsourcing your taxes to a financial professional, you’re able to focus on what you do best and let the professionals handle the rest. If you need a accountant as a freelancer
or small business get in touch with us at Outsourced Finance.