The Tax return for self-employed people is a challenge for many. As a self-employed person, you are legally obliged to have one Income tax return to give away. For most freelancers, this part is an annoying task that only causes unnecessary effort and a lot of nerves.
To ensure that something like this doesn’t happen to you, we’ll tell you in this article the 7 most common mistakes when filing tax returns for self-employed people.
Table of contents:
- Let the deadline pass
- Documents are missing from the tax return for the self-employed
- Declaring and entering expenses incorrectly
- Incorrect classification of insurance costs
- Mixing private and business costs
- Advance payments too low
- An unfavorable legal form
Error #1: Allowing the deadline to pass
Since 2019, the deadline has been changed so that you must submit your self-employed tax return by July 31 of the following year. However, many people don’t seem to know this yet or don’t think it’s that important. The fact is: This is one of the typical mistakes that many self-employed people make year after year.
Some people don’t really care about deadlines and are of the opinion: hand it in one or two months later, what difference does it make? However, this view is fundamentally wrong, because fines can be incurred if a warning is issued by the tax office.In addition, the risk of a tax estimate that will most likely be made to your disadvantage increases.
If you can’t find time to prepare and submit your income tax return on time, there are two options:
- You hire a tax advisor who will complete your income tax return as part of their work. The deadline is then automatically extended until December 31st.
- Alternatively, you can request an extension of the deadline. However, this should be done early and must be well justified. If you have an increased workload and the stress in the phase is demonstrably higher, an extension is possible.
Error #2: Documents are missing from the self-employed tax return
A fairly new regulation that doesn’t seem to have fully caught on with many self-employed people - we’re talking about the evidence. You are no longer required to submit all receipts for expenses.
But: You must be able to provide evidence of the expenses you claim in your tax return at any time.
If the tax office requests additional receipts as part of the review, you can only claim the costs if you submit them accordingly.
Error #3: Declaring and entering expenses incorrectly
There are different categories and items within the self-employed tax return. It is important to differentiate here because you have to allocate your expenses correctly within this.
However, many people make the allocation at the last minute and enter costs in the wrong place. The tax office shows no night vision here and punishes mistakes directly by deleting them.
A certain degree of care is therefore essential, especially when completing the self-employed tax return yourself. So that such a faux pas doesn’t happen to you and you don’t have any costs canceled, make sure you state your expenses correctly!
Error #4: Incorrect classification of insurance costs
You can deduct the expenses incurred, such as business liability insurance, from your taxes. But: There is more than one place in the tax return for these expenses and therefore care is again essential.
Many self-employed people have massive costs penalized. Simply because the costs for the insurance are incorrectly allocated and not entered correctly.
In addition to business liability etc., you can also Precautionary expenses drop. Accordingly, you can claim the costs of retirement provision as costs, as well as health and nursing care insurance items.
Error #5: Mixing private and business costs
The classic mistake – what is meant is mixing up the items. Many self-employed people make the mistake of stating supposedly business items that end up being private in nature.
To avoid misclassification, separate bookkeeping is important. Use a separate account for business items and a separate one for private ones! This will prevent these mixes from occurring at all.
The fact is: your operating costs are fully tax deductible. However, in some cases this is not easy. For example, if you are a content creator and write about sports, you are definitely allowed to deduct your study - but only if you meet all the necessary requirements.
The same applies to self-employment in the craft sector. Of course, you can make customer trips in your private car - but only with 30 cents per kilometer.In addition, and especially here, the tax office is picky; it requires clear documentation - in which the trips are strictly documented.
The same applies here:If you do or at least prepare the self-employed tax return yourself, give yourself enough time and invest three to four hours more. It is worth it!
Error #6: Advance payments too low
An often underestimated mistake that ultimately costs many self-employed people dearly is setting advance payments that are too low. Quite a few people plan their year quite uncertainly and deliberately pay less in the quarter - preferring to pay the majority of the sum at the end of the exam.
Many freelancers even set their quarterly payments to 0 euros and are surprised at the end when the big bill comes - and they get into trouble.
Error #7: An unfavorable legal form
Last but not least, and this is an equally serious mistake, many self-employed people choose a suboptimal legal form.
Many self-employed people set up a UG or GmbH because they seem to radiate more seriousness. The fact is, however, that such a legal form can result in tax disadvantages.You should therefore take your time and carefully consider which legal form suits you best.
