Should freelancers and self-employed people use accountants?

⏱ 5 min reading

The Short Answer: Yes!

You may wonder why would you need an accountant? Especially with so many software solutions out there nowadays that help people file their own taxes. You might feel like paying an accountant just isn’t worth it or you can’t afford one. But here are 8 important reasons why we believe that as a bare minimum, you should at least get an accountant to review your tax returns.

8 Reasons why you should use an accountant.

But it is very important that you do NOT mix your private expenses with your business expenses. You do not want to commit tax fraud, or be caught lying on your tax return. The consequences can be severe.

But, if you do have business expenses that are eligible, then you should definitely make the effort to claim as many as possible. The expenses one can claim for their business, greatly depends on the industry and the nature of the business, but below you can find a list of some of the most common expenses that freelancers and self-employed people should consider:

1. Staying up to date with all the rules and regulations

An accountant can help you stay up to date with all the new tax updates and changes in regulation that may affect how much tax you end up paying. This is especially relevant nowadays, as many countries rolled out special incentives and tax rebates to help businesses survive the COVID-19 crisis.

For a while, there were new regulations coming out every few weeks. As a result, it can be very hard to keep track of the most up to date tax news, when you are busy trying to focus on running your business. Business is already hard enough with COVID-19, you might as well focus on your business and not get distracted by all the new regulations being announced every few weeks.

2. Maximising your business expenses

An accountant can go over your expenses and make sure you are claiming as many suitable expenses as possible. This in turn, reduces the “profit” of your business. The lesser the taxable profit, the less money you have to pay to the tax man. By having an accountant guide you through this process, you can potentially save a lot more money, than the cost of the accountant. Head over to our other article in our Freelancer series to learn more about the sort of expenses you should be looking out for: HERE

3. Less chance of getting audited

If you use an accountant, you are less likely to get audited compared to someone who completed the tax return all by themselves. The logic is that, a registered accountant, would have had to look over your accountants to make sure nothing is out of the ordinary. It is in the accountant’s interest to make sure you have not made any mistakes. Accountants do not enjoy getting audited either, and they can get into trouble if mistakes are found during an audit.

As such, the tax authorities are far more likely to audit someone who completed their own tax return by themselves without the help of a qualified accountant. Such people are far more likely to have a mistake in their tax return, as they are not accountants themselves and no accountants have looked over their tax returns.

As a result, if you file your own tax return, you are putting yourself at a higher risk of getting audited. Getting audited is not fun. It can be a very stressful process and it can take several weeks or months. If the tax agents are able to find any mistakes, it can cost you dearly. Furthermore, once you have it in your record that mistakes were found in your tax return, you are even more likely to get audited again in the future.

4. Later deadlines for filing tax returns

By using an accountant, in many countries, you are actually given more time by the authorities to hand in your tax return. The extra time can be extremely helpful if you need time to gather up all the information or if your industry gets very busy over certain months and you risk missing out on the tax return deadline.

5. Business advice

An Accountant’s duty can go far beyond just the realm of tax return preparations. Accountants can provide direct business advise that may help you in your business. Many accountants receive years of training, and through dealing with many other freelancers or small business owners, have learnt a lot about many businesses and how they are run.

They can share their experience and learnings with you and in some way, be a partner to you in helping you run your business as efficiently as possible. Furthermore, they can also help by introducing you to their financial and banking network, in the case of you needing a loan or other specific banking services.

6. Social security/family support

In some cases, your accountant can also help you with your social insurance/security obligations, while at the same time, maximising the benefits that you can receive from it. These can include whether or not you are married, have children, require family support/assistance. All of these factors could potentially impact your tax and social security obligations.

7. Overview of one’s tax obligations

Your freelance business might be something you do, while also having a part time or full-time job. This means you have more than one source of income. In such scenarios, it is wise to get an accountant’s advice to make sure that you have been paying the right amount of tax for the various sources of income, as they can affect one another.

8. Reminder for filing and payment due dates

An accountant can remind you of the various due dates for filing your returns and also for making payments. Since the tax authorities want your taxes throughout the year, there are a number provisional/instalment tax payments that business owners need to make throughout the year. It can get pretty confusing keeping track of all these dates, for income tax, and GST/VAT, and possibly social security or other payments. The due dates for filing your returns, are generally different from the payment due dates.

Conclusion

We understand that using an accountant may be quite expensive, but I hope that after reading our reasons above, you understand why we feel that, you should at least have an accountant involved in your tax return preparations. Over time, as your business begins to grow, the question eventually becomes, “Can you afford not to hire an accountant?”.

Save yourself some money

The best advice that we can give you is that you should keep track of all of your receipts and invoices, and arrange them in a nice and orderly manner, along with all the other relevant business information.

Prepare your tax returns to the best of your ability, in order to save your accountant as much time as possible. Remember that many of them charge by the hour. So, if you can save them some time, you are saving yourself some money.

Physical vs Digital shoe boxes

Accountants do not appreciate receiving a shoe box full of unsorted and messy receipts and paperwork. In the near future, we plan on releasing more features on our website, that will help people better prepare their digital shoe boxes.

In the meantime, if you have any questions or topics you would like us to write about, please get in touch. Thank you for reading.