[Question] Income Tax, Turnover Tax, and freelance work

[MidlandsDesign]

In January this year I was retrenched and I started doing freelance work as a software developer and web designer. I have up until now not paid any taxes, but I realise that this is something that I probably need to be looking at fairly urgently. When embarking on this freelance business I was not expecting to do as well as I have, and did not register for provisional tax or any other kind of small business tax. I therefore have 3 questions...

1. Being a software developer/web designer, would I qualify for the simplified micro business taxation option of Turnover Tax?

2. If not, would I need to back date my income and end up paying in the tax for the months that have passed? My overhead expenses are very low and my monthly turnover puts me in one of the top tax brackets (35%).

3. Option 2 is a bit scary as I have not provisioned for this at all. Should I need to cough up for the taxes not yet paid, would SARS allow me to arrange a payment plan to 'pay off' the outstanding taxes?

I have contacted SARS, but the chap I spoke to could not answer me and said I would be contacted within 21 business days...

Any feedback will be greatly appreciated.

[Dave A]

Based on some other threads, I suspect you might not be able to take advantage of Turnover tax.

In terms of going forward, file your 2011 tax return and get that squared away pretty quickly. Your tax liability depends on your income for the whole financial year, so just what your liability may be depends on the earnings (and PAYE contributions made?) for the rest of the financial year.

The next step is probably to register as a provisional tax payer, and start budgeting for tax. You will need to make a provisional payment in February, essentially for the expected tax liability for the 2012 tax year.

[MidlandsDesign]

Based on some other threads, I suspect you might not be able to take advantage of Turnover tax.

In terms of going forward, file your 2011 tax return and get that squared away pretty quickly. Your tax liability depends on your income for the whole financial year, so just what your liability may be depends on the earnings (and PAYE contributions made?) for the rest of the financial year.

The next step is probably to register as a provisional tax payer, and start budgeting for tax. You will need to make a provisional payment in February, essentially for the expected tax liability for the 2012 tax year.

Thanks Dave A. This tax thing is a bit worrying, but I suppose ignorance is no excuse... I'll contact a tax consultant and see what the options are.

[geraldenek]

Hello MidlandsDesign

As Dave metioned, you will not be able to register for turnover tax as you are a personal service provider.

For 2011 income tax return:

you mentioned you started in jan so for the 2011 tax year you will have to compile you income and expenses for jan and feb 2011.

1 March 2011 - 28 Feb 2012 is for the 2012 tax year only due next year June/July.

Provisional tax:

You wil have to register now for provisional tax and do a calculation of your profit from 1 March till end of october. Complete the August 2011 return as Rnul as this had to be submitted already and you will pay 10% penalty. Submit the Feb 2012 return and also a 3rd voluntary return and pay the taxes outstanding for the 2012 year.

You mentioned that you are at a 35% tax rate, why not register a pty and trade from there with a flat rate of 28%?

[Dissel]

I may be able to help with accounting and tax work. I have an office in Hilton.