Taxes in Part-Time Self-Employment - What, How Much, and When?
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| Photo by Kelly Sikkema on Unsplash |
The tax office is very strict and therefore you should know exactly what you have to do and pay from the start.
Therefore, in the following, I will show you which taxes are incurred for part-time self-employed people and what else you have to pay attention to.
Parts of the article series:
- Introduction
- Why freelance part-time?
- Important preparations
- Typical questions
- Finding and examining part-time business ideas
- Legal form, business plan, business registrations ...
- Financing and funding
- Planning and goals
- Time management tips
- The ideal place to work for freelance self-employed persons
- Sun. stay motivated part-time self-employed!
- Taxes in part-time self-employment
Note: I am not a tax advisor so the following information is just the basics and my tips. If you have individual questions or problems, you should contact a tax expert.
Do You Have to Pay Taxes in Part-Time Self-Employment?
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| Taxes in Part-Time Self-Employment - What, How Much, and When? |
I am repeatedly asked by readers whether you have to pay taxes as a part-time website operator. There are sometimes very strange ideas and dangerous half-knowledge. Here some examples
- I am an employee. Can I earn a certain additional income per month without having to provide information to the tax office? (up to 400 €?)
- Do I have to pay taxes on any income or what amount do I not need to report?
- Do I have to register somewhere for tax purposes so that I don't have any problems later?
I'm afraid there are a ton of people out there who are part-time running websites and generating income without registering with the tax office. There may be tax evasion here, which can be a lot of trouble.
Because, like normal self-employed, self-employed persons also have to register a business and pay taxes.
Tax Office
When registering a business, which is necessary, the tax office is automatically informed. That is why you will receive mail from the tax office shortly afterward.
You have to fill out a questionnaire for tax registration and you will then be assigned a tax number. Incidentally, this must be added to your bills later.
It's best to apply for a VAT ID at the same time. This is recommended because many sources of income on the Internet do not come from Germany and you are therefore active across borders. You need a VAT ID number.
What Taxes are There?
Once all of this is done, it is important to know which types of taxes are eligible for you. For part-time self-employed who run a business, these are the following:
Income Tax
Income tax is of course very important. This will usually make up the largest amount of tax.
The profit from the part-time self-employment (sales - expenses) is part of the income tax return and is taxed together with the income from the main job. However, one must state the commercial profit in a separate form. This is either Appendix S (for freelancers) or Appendix G (for tradespeople). The EÜR system is necessary if you have a turnover of more than 17,500 euros per year. Since 2017, the EÜR system has generally been necessary when using the income surplus calculation. There is no longer any turnover limit.
The tax rate depends on the amount of profit (+ income from the job) and can easily be between 30 and 40%. Therefore, you should put money aside for it early on, because due to back payments and advance payments that the tax office can demand, you have to pay quite high amounts to the tax office in some cases. Deferrals are possible, but then the tax office will take a closer look in the future.
I am writing this so urgently here because employees are not used to it from their job. There everything is paid by the employer and you usually get something back from the tax office through the tax return. This is completely different in self-employment.
Incidentally, the digital submission of the tax return is now also mandatory.
You should also have a separate checking account for your part-time income and expenses, as the tax office is otherwise very skeptical.
Value-Added Tax
Sales tax is also important. As a founder, you will have to report this to the tax office every month and pay it off.
The sales tax received ( invoices to others) is offset against the sales tax paid (expenses for one's own business). The sales tax received is usually higher than the one paid. You then have to pay the difference to the tax office.
You can only get around this by using the small business regulation. This is possible if your annual turnover did not exceed EUR 17,500 in the previous year and is not expected to exceed EUR 50,000 in the current year. As a small business owner, you are not allowed to state sales tax in your invoice (and thus not pay it to the tax office), but you cannot get any sales tax back.
In the online business, this is worth considering, as you hardly have any expenses. In addition, you save the monthly sales tax advance notification.
Business Tax
The third type of tax usually only comes into effect later, if at all. The trade tax only has to be paid if the profit exceeds EUR 24,500 per year.
However, this is often not the case with self-employed part-time workers, at least not in the first few years.
Affiliate Marketing, AdSense, and Co. - What About Taxes Here?
The above-mentioned types of tax naturally also apply to website operators who use affiliate marketing or Google AdSense.
Nevertheless, there are some peculiarities here because these providers often come from abroad. That's why I published sales tax tips for affiliates and AdSense users in another article. In it, you can also find out, for example, what you have to consider when selling eBooks.
You can find more detailed information and tips here.
Proper Bookkeeping is the Basis
The basis for problem-free payment of taxes and thus a good relationship with the tax office is proper bookkeeping. However, self-employed people in particular often underestimate this. The regulations, e.g. from the GoBD, apply to them as well.
Another important decision is whether to use the income-surplus-calculation (EÜR) to determine the profit or the more complex accounting. You can choose freely from an annual turnover of 600,000 euros or an annual profit of fewer than 60,000 euros per year. In addition, you have to use the more complex balancing.
You can do the bookkeeping and the annual financial statements quite easily with a suitable online invoicing tool. Some on the German market offer everything from simple invoices to accounting.
I use lexoffice and I am very satisfied with it. In the “Accounting & Reports” tariff (14.90 euros per month) it is possible to make the EÜR and the P&L (necessary for accounting). Or you use a cheaper tariff and can easily hand over the accounting data to your tax advisor for the conclusion.
Conclusion
Anyone self-employed on a part-time basis should take taxes seriously and proceed correctly from the start. This includes a business registration with automatic notification to the tax office.
In addition, you should quickly learn that the income on your business account is not 100% yours. In particular, sales tax and income tax are still off, so you should put enough money aside if the tax office wants the money.
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