A lot of people wish to be self-employed, and without a doubt, it has its bunch of advantages. Being self-employed means that you are responsible for your business and you can work at your own pace, and there are numerous other advantages you may get (Also see How Can Business Owners Manage Their Time Wisely). Nevertheless, some disadvantages may come with this freedom; as a freelancer, you are all on your own when it comes to bookkeeping, record keeping, as well as tax filings. As this is your business, you have to determine a way to manage every section of it. To reduce some of your burdens, you should think about employing a professional accounting firm Johor Bahru to assist you with the bookkeeping tasks.
The accounting, as well as tax requirements of a freelancer in Malaysia, are not the same as other workers of any organisation (Also see Steps to Start a Successful Business). Personal income tax of a self-employed person in Malaysia is according to their net-income (Net Income = Gross Income – Business Expenditure). Hence, let us look at some errors you should never make when you are calculating your net income.
Inappropriate Filing Of Your Business Income
If you are a private instructor, freelancer, commission agent, property agent or insurance agent, you have to file your taxes as a self-employed person (Also see Money Management Tips for Startups). If you are submitting your income tax online, you must record your income as trade income. However, you have to fill Form B if you are filing on paper.
Poor Record Maintaining
You should never file an estimated income as final income. All income that you report needs to be valid and precise. This is a great reason why you need a professional accountant (Also see How an Accountant and a Financial Planner Differs) to assist you with your bookkeeping documents. You need to keep all your records and documents for at least five years so that you may validate your purchases and expenditures when you file your income tax. Hence, it would be best if you kept all of your invoices, receipts, bank statements as well as vouchers properly.
Wages Paid To Your Partner Is Not Considered as Your Business Expenditures
You cannot classify fees or wages you pay to your partner as a section of your business expenditures. Instead, you have to categorise them as business drawings (Also see Practices That You Should Avoid in Bookkeeping).
You should not file personal spendings such as extra medical costs, or your personal bonus, as business expenditures for tax purposes. If you submit anything apart from the permitted business expenditures such as trade bad debt (Also see The Proper Way of Recording the Provision for Bad Debts), you may be subject to a penalty by LHDN. You may receive punishment if you make any of the errors mentioned above, and the chances of you making them are even higher if you are filing your income taxes on your own. You ease the tax filing process by employing a professional accounting firm in Johor Bahru to give your tax a quick inspection to stay clear of any errors.