Dealing With Taxes

One of the things you don’t expect when you go into business for yourself is just how different your taxes are going to be.  For the most part, taxes as an employee are pretty easy and straightforward.  There are even free computer programs that will do them for you.  You just enter your income, your amount withheld, your dependents, any interest paid, if you had any investment sales or dividends, and you’re done.  Click the button and submit them online and do it again next year.

But when you’re self-employed?  Ha.  It’s not even close to that.

I remember the first year I had self-employed taxes.  Since I was doing everything myself, I decided that I was going to do my own taxes by myself as well to save money.  After all, I had done my taxes every year prior and I certainly didn’t see a need to pay someone to do them for me.  How hard could it be?

I sat down and got to work.  What were all these new forms I had never seen before?  How much of this stuff can I claim as expenses?  What am I doing?

I finally finished, or rather, I thought I finished.  It said I owed quite a bit of money.  Since I didn’t make very much money my first year anyway, I was pretty surprised to see that I might actually owe as much as I had worked out.

After deciding that this couldn’t be right, I decided it would be worth the money to hire an accountant to help me out.  Tax accountant Five Dock?  I need your help!

Fortunately for them, I did manage to keep really good records of everything.  I had all my receipts for business expenses in an envelope so everything was clear and easy to find, and I could show exactly how much I paid for everything.

Fortunately for me, my accountant knew what he was doing, and it turns out I was actually going to get money back rather than owing money like I had figured on my own.  So this alone more than made up for the cost of working with him, but it also gave me the security of knowing that everything was done correctly (as opposed to all the mistakes I made when I tried to do it myself).

So the best advice I can give for someone who is newly self-employed is to keep track of all your income and business expenses, and remember that every country has its own laws about what can be expensed, but you may be able to deduct supplies that you purchase for work, part of your rent or mortgage (if your office is part of your home), and part of your internet bill (assuming you work online). Basically, if you are spending money and it is related to your business, make sure you save the receipt for tax time.  Your accountant will know exactly what you can and can’t expense, but to do so you will need the receipts, so save them!

Also, be aware of estimated taxes, but that’s another topic for another day.