There are many programs available to assist freelancers with bookkeeping. Alternatively, you can hire a tax preparation service to do all the hard work for you.
In addition to income tax, sales tax is an important tax for freelancers and their business. This is levied on almost all goods and services and is, therefore, a value-added tax from an economic point of view. As a freelancer, however, you are not allowed to withhold this additional amount through sales tax but have to pay this sales tax directly to the tax office.
Freelancers and Taxes: Input Tax
For freelancers, the counterpart to sales tax is input tax. Because freelancers who collect sales tax are allowed to offset it with what is known as input tax. This is included in all expenses that were made for your own independence.
The input tax is determined as follows: In order to be able to offer one’s own services, the goods or services of other companies are usually used. The supplier will also invoice you a sales tax for this. Freelancers can claim and offset this sales tax amount as input tax against their own sales tax. Here is a sample calculation for input tax.
Tax return for freelancers
For freelancers, the bookkeeping according to the income-surplus-invoice (EÜR) comes into question. It is a simplified method of determining a company’s profit. In general, all companies that are not registered in the commercial register can use the income-surplus-calculation.
For the EÜR, all actual incoming and outgoing accounts are to be noted in a so-called journal. If the freelancer wants to calculate taxes and do his bookkeeping according to the income-surplus-account, he should structure his income and expenses according to the types that he incurs and use the official EÜR form.
Examples of income of the EÜR in the journal are the operating income at the full sales tax rate as well as the reduced sales tax rate, but also the sale or withdrawal of fixed assets and the private use of the company car represents income in the sense of the EÜR. Examples of expenditure by the EÜR in the journal are the Costs for office supplies and the study, entertainment costs, depreciation, or even the tax advisor.
If you, as a freelancer, determine taxes and want to do the EÜR, you must always show the amounts in the EÜR as a total amount, i.e. without sales tax or input tax. A monthly balance must be created in the journal. The values of the individual categories are then to be transferred to the form for the income surplus invoice, which must then be attached to the tax return if the profit is over 17,500 euros per year.
