If there’s one word that can ignite fear in any freelancer, it’s “tax”. But there are ways to make dealing with SARS a little bit easier. Here they are.
Find a record-keeping system that works
And use it. Track your expenses and earnings regularly, using a simple spreadsheet or the software of your choice. Depending on your business, that could be weekly, monthly or quarterly. Schedule time in your calendar to make sure you don’t run out of time to get this done and plan something fun to do afterwards.
File all your invoices and receipts in a way that makes sense to you. No judgies if you like to print everything out and keep it in an old-school lever arch file - you do you. I find a Google drive folder divided by income, expenses, year and month to be an easy way to make sure I can always access my records.
Don’t leave it until the end of the year
Just don’t do it. You’ll be in a world of hurt. Also, most freelancers are provisional taxpayers and therefore need to file three times a year: August and February for provisional and then from July for the actual year. So the end of the year happens more often than you think!
While you’re doing all this tracking and filing to keep good records, you’ll also want to create a specific spreadsheet just for tax and update that every time you sit down to take records. When tax time comes around, all you need to do is pull up your document and double-check it.
From a financial standpoint, it’s best to put money into a separate account just for tax purposes and do it regularly. There are a few ways you can make sure this happens. If your income is pretty regular, use a monthly debit order to make sure that SARS account gets filled up. If you get paid less frequently or prefer the manual approach, you can transfer money every time an invoice is paid. You can even keep the lump sum that SARS pays you back in a high-interest account to use the following year. However you choose to do it, be kind to your future self and make sure the money is set aside.
Set yourself up for success
You should have a separate business bank account and use it for all the expenses you can claim from tax. Pay for industry-related subscription services, office space, travel and even work-related meals from that account. This way, when it comes to filing your tax return, you don’t have to comb through every transaction you’ve ever made and try to work out whether it's claimable or not.
There will be some instances where you might pay from your personal account and then still claim a portion from tax. For example, if you work from home, you’re only allowed to claim a portion of your rent or bond as a workspace. But for the most part, these kinds of mixed expenses will be the exception rather than the rule.
Know what you can claim
Following on from using your work account for business expenses, you need to know what constitutes a business expense. There are loads of rules around what you can and can’t claim, some full articles are dedicated to it, and info on the SARS website. If you’re not sure about a particular expense, get hold of a tax professional and ask them. This isn’t an area you want to make mistakes. It’ll be painful to rectify later.
And how to claim it
Remember that with anything you decide to claim, you’ll need to be able to prove it was a legit expense. SARS could decide to audit you, and you’ll want to have as much information as possible ready for them. This isn’t a warning not to be shady (though obviously don’t be shady) but rather to know for yourself what the “cost” of claiming will be.
If you want to claim petrol, for example, you’ll need to be able to show your logbook. If the idea of recording all your trips isn’t worth the extra cash, then look into an electronic logbook option. That way you can plug it into your car and export the info when tax season arrives.
If you need a professional, hire them
For legal reasons, this is an opinion and not financial advice: tax is an area that some people are passionate and knowledgeable about. If you’re not that person, it’s worth finding them. You can get your tax professional to help in a variety of ways, so find an arrangement that suits you.
Maybe you’ve read this whole article, had a small panic attack, and decided it’s worth paying someone to manage everything for you, including bookkeeping. That’s one option. If you feel more confident, you can ask your tax person to just file for you three times a year. If you’re somewhere in between, consider booking a consultation with a reputable professional to ask all the questions specific to your situation and make a decision from there.