Going Legal - paying your taxes

Going Legal - paying your taxes

In a standard employment, contracts are signed at the start of a working agreement and, generally speaking, your boss takes care of all of the details after that. You tend to receive a pay check which has your tax and national insurance and any other legal fees (depending upon your country of residence or employment) deducted from your earnings, and any miscalculations are found out when the government does its annual review of taxes or when you do your yearly tax returns and any mistakes are reimbursed, one way or another.

One of the biggest hurdles to overcome and most daunting tasks with freelance work and self employment is establishing yourself as a legal entity. Taxes and other legal fees have to be paid as per the law of the country of your residence, and this can get very complicated, however, if it doesn't get done, you will be breaking the law, and you risk the chance of having legal action taken against you.

Firstly, do a little research and try to understand the tax requirements of your country of residence. Different countries have different tax brackets, different laws and different processes that you should familiarise yourself with on a local scale so you know what is expected of you before you even begin. This should reduce the risk of receiving a large bill for your entire year of taxes that will completely demolish all of your savings and potentially cause huge problems for you. A good place to start, if you are struggling to figure it out, is by putting aside 30% of your earnings to put towards your tax. The actual amount can be higher or lower, but this is a rough average that should, at the very least, give you a foundation to work upon.

One idea is to work with a tax professional or an accountant. There are many small firms who specialise in supporting freelancers and self employed people, and although this can be very expensive, it can also save you substantially in the long run. These people know how to deal with tax, and they will be able to ensure that you pay the minimum and correct amount, and will do a lot of the hard work for you. They also will be able to understand all the deductions and credits you are entitled to, providing you give them a very clear picture of what your business entails. You should always ensure that you save all of your invoices and payment information from your clients to send off to an accountant if you wish to pay your taxes this way.

If you wish to tackle the arduous task alone, you should always save your invoices regardless incase of any disputes from the tax man, and also to help you fill out all of the information correctly. There should be sufficient information on the official tax websites of the country that you live in to help you understand how to complete your tax payments, how frequently it has to be done, and how it is regulated. Some countries also have a Self employment tax that you will need to be aware of.

If you think you can get away without paying your taxes, you are taking a huge risk. Not only if you get caught will there be fees, but also the accumulated interest on these fees, and it will also be on top of the tax with interest that you owe. It is far better to make sure you file an accurate tax return every year, and if there are huge discrepancies between you and the government, it could simply be some miscalculations from either side, and there are always payment plans available that should make it more approachable to tackle any debt that seems a little out of hand.

It's best just to do things right and properly. Register yourself as a self employed person to your government, set up a plan for your taxes, and make sure you are adhering to the regulations and guidelines set. It is a horrible and time draining task, but it has to be done for your peace of mind and to avoid big problems in the future.