Do freelancers have to pay tax?
Are you a freelancer? Then you need to stay informed so that you can get your taxes in order. Navigating a complex tax environment can be tough but it’s easier once you’ve done your research. While other people get a pay cheque with their tax already deducted at the end of each month, freelancers are in a more challenging position.
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Freelancers need to register at SARS
First things first, you need to make sure that you’re actually registered as a taxpayer. You can avoid the stress of trying to deal with a backlog of unpaid taxes by registering with SARS. While you don’t have to register as a company or business entity, you’ll be required to register as a provisional taxpayer. This term is used to describe a person who is making money outside of a monthly salary. You’ll need to go into SARS to register with your bank statement, ID document, and proof of address.
Submit tax returns
Freelancers are required to pay tax twice a year. As a provisional taxpayer, you’ll need to submit an IRP6 tax return manually in February and August. It’s also necessary to submit an ITR12 tax return annually between July and November.
Record your business expenses
Tackling the admin of recording your business expenses is tedious but it pays off. Set up an Excel sheet and list the various categories of your expenses. Include telephone, cell phone, and website expense sections. You can add expenses from your home office, which includes all the business costs associated with your house. This may include furniture, stationery, a portion of your rent, and utility bills.
Remember to insert a column for your monthly turnover so that you can compare it to your expenses. These business costs are tax deductible, so if you’ve recorded them properly, you can include them on your ITR12 tax return form. Don’t forget to keep all the supporting documents, including invoices, calculations, and proof of your expenses.
Save for tax payments
As a freelancer, you’ll be required to pay tax twice a year. Make sure that you have the cash you need to make these payments by putting money aside each month. Put the money in a savings account where you can earn interest at the same time.
Submit your medical aid tax certificate
If you have medical aid, part of the monthly payments you make is tax deductible. You’ll also be able to deduct some of the medical costs you have paid for. These deductions must be included on one of the IRP6 forms you submit during the year.
Consider international payments
As a freelancer, you’ll have the advantage of being able to take on clients from across the globe. However, trying to work out your tax for international payments is challenging. The tax regulations will depend on the country that your client lives in, and you’ll still need to consider your payment to SARS. The tax treaties between various countries determine which countries can make deductions from your income. In the case of international work, it’s best to consult with a tax professional or a consultant at SARS.
While sorting out your tax is challenging, it will save you from future hassles and additional penalties. Looking for freelancing work? Find exciting opportunities on Job Mail today.