Is it Necessary for a Virtual Assistant to Pay Tax
Well, the law states that Everybody must pay tax.
If you are an employee, then your employer registers for SITE/PAYE, deducts the tax off your salary and sends it to the Receiver of Revenue.
If you own a business – and Virtual Assistants normally are independent business owners – the Income Tax Act says that you must register yourself as a provisional taxpayer. It does not matter whether you are a sole trader, a partner, a member of a CC or a director of a Company – it works the same for everybody.
Click here for a short overview on the differences between these business legal structures.
Sole trader and partnerships only need to register in the name of the sole trader or of the partners, because the law does not make a distinction between the debts and assets of the people who own the business and the debts and assets of the business.
Close corporations (CC) and companies must be registered in the name of the CC or company. The members of a CC, and the shareholders and the directors of a company still have to pay their own personal tax, so they would also be individually registered as taxpayers.
KEEP RECORD OF YOUR EXPENSES
Working from home as a Virtual Assistant means you are running your own business and are allowed to deduct your expenses from your income.
What expenses you might ask. Well let’s see:
- You need a telephone to contact your clients – landline and/or cell phone;
- You need internet connection in order to communicate with your clients – ADSL or 3G;
- You need a copier and fax;
- You need business cards and marketing material;
- You need a car and petrol to visit your clients – if you indeed do that;
- You need stationary to run your office;
- You need to advertise your business;
- You need to network with people and sometimes need to have business lunches;
- You need to be a member of several organisations (such as Be Virtual Assistant Wise) to promote your business and have to pay membership fees;
- Your need an office – thus, a small percentage of the electricity and water usage can be allocated to your business.
This is only a few categories where you will be able to claim back or deduct your expenses from your income. Talk to your auditor, he or she will certainly have more categories for you.
Remember you have to keep proof of all the expenses you had during the year. In other words, if you buy a pen for your office, keep the slip. When you pay your membership fees, keep proof of the Electronic Funds Transfer (EFT). When you advertise in the local papers, keep your invoice and receipt.
ORGANIZE YOUR EXPENSES
Keeping all these till slips and invoices can add up to quite a bit and to sort them out at the end of the year might become a nightmare. So get organized right from the start.
An easy and effective way to organize your expenses is to buy a few big envelopes (as many as you might need) and mark them with the categories above. Every time you pay something, put the slip, invoice and/or receipt in the related envelope and at the end of the financial year only add each category up. This will also help you to summarize your expenses for your auditor.
Like it or not, you have to pay your taxes. The trouble is that understanding taxation requires more than a genius mind.
Even Albert Einstein admitted, “The hardest thing in the world to understand is income tax.”
So, if you are wading through reams of paperwork, trying to make sense of all the mumbo jumbo, it’s time to take a break. Read these funny tax quotes over a cup of hot cappuccino and share a laugh with your friends. If the coffee doesn’t work, these tax quotes will surely perk you up.
Will Rogers ~ It is a good thing that we do not get as much government as we pay for.
Albert Einstein ~ [on filing for tax returns] This is too difficult for a mathematician. It takes a philosopher.
Ronald Reagan ~ The taxpayer: that’s someone who works for the federal government, but doesn’t have to take a civil service examination.
Joe E. Lewis ~ The way taxes are, you might as well marry for love.
Denis Healey ~ The difference between tax avoidance and tax evasion is the thickness of a prison wall.
Vanya Cohen ~ When there’s a single thief, it’s robbery. When there are a thousand thieves, it’s taxation.
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