Being self-employed is a goal for a lot of people, and it undoubtedly has its own bundle of benefits. From being in charge of your business, to working at your own time and pace, the benefits are numerous. However, this freedom has its downsides; as a self-employed individual, you have to do all record keeping, bookkeeping and tax filings yourself. You are your business, and you have to figure out a way to handle every aspect it. To help you with some of these burdens, you should consider hiring an expert in accounting services in Singapore to help with all of your bookkeeping.
The accounting and tax needs of a self-employed individual in Singapore are different from regular employees of any company. Personal income tax for a self-employed individual in Singapore is based on their net-income, which is the deduction of their business expenses from their gross income. So, let us look at some mistakes you must avoid in the process of calculating that.
Wrong filing of your trade income
If you work as a freelancer, private tutor, property agent, commission agent or insurance agent, you must file your taxes as a self-employed individual. Your income must be declared as trade income under the “Item 3 ‘Trade, Business, Profession or Vocation,” if you are filing your income tax online. But if you are filing on paper, you have to fill Form B: Page 2, item 6 to 9.
Failing to declare commission income
Every type of commission income must be declared in your filing, and this is done in the “Trade, Business, Profession or Vocation” section.
Improper record keeping
Never make the mistake of filing estimated income. All income reported must be accurate and factual. This is an even better reason why you need an expert in accounting services in Singapore to help with your bookkeeping records. You should have your records and documents of at least five years at hand so you can ratify your expenses and purchases when filing your income tax. All of your receipts, invoices, vouchers and bank statements should be kept properly.
Salary paid to your partner is not part of your business expenses
In your tax filings, salary or fees paid to your partner cannot be categorised as part of your business expenses. You should instead classify them under business drawings.
Private expenses like excess medical costs, or your own bonus, should not be filed as business expenses for tax purposes. If you file anything other than the allowed business expenses, you may be penalised by the IRAS.
Making any of the above mistakes can get you penalised, and you are more likely to make them if you are filing your taxes yourself. You can make things easier by hiring an expert in accounting services Singapore to give your taxes a lookover to avoid any mistakes.