As a self-employed person, you must disclose your company's profits in your tax return every year. In many cases, a simple income statement is sufficient, especially if you are self-employed or your annual income and turnover are low. To avoid making mistakes when calculating profits that could lead to financial disadvantages or, in the worst case, be interpreted as tax evasion, it is often a good idea to contact a tax advisor.
Please note, however: if your company is registered in the commercial register, you will have to prepare a more complex annual financial statement. This can also be done by a tax advisor, but costs about twice as much as an EÜR. Sales tax and trade tax declarations must also be paid separately and typically cost a few hundred euros each.
How can a tax advisor help the self-employed?
When starting out as a freelancer or entrepreneur, most self-employed people have a lot of questions about the legal framework, registration forms for various authorities, and tax prepayments or exemptions. Misunderstood legal texts can often ruin self-employed people in their first few years of business if they are suddenly asked to pay additional taxes that they hadn't expected. Tax advisors can provide you with professional support when you take the step into self-employment. Here you not only benefit from their expertise in tax and financial matters, but also from the business management knowledge that tax advisors acquire as part of their training.
Once you understand the recurring processes and tax rates, it takes very little effort to keep the tax office up to date on your company and its tax obligations. However, this requires that you keep proper internal accounting records. The larger your company, the stricter the requirements are. In addition to employing accountants, you can also simplify bookkeeping and personnel accounting by having your tax advisor do it for you. The advantage is that you do not have to be liable for any accounting errors yourself, but rather have shifted the responsibility.
What taxes do self-employed people have to pay?
The group of self-employed people can be divided into freelancers and tradespeople. The freelance professions include scientific, artistic, literary, teaching and educational professions, such as engineer, architect, journalist, tutor, musician, doctor and alternative practitioner. All self-employed people who do not work as freelancers must register a business and pay trade tax on profits that exceed 24,500 euros per year. In principle, all self-employed people must pay sales tax. However, there are exceptions for so-called small businesses whose annual turnover is below 17,500 euros.
Income from self-employment and business operations must be declared in your personal income tax return and is taxed at your individual tax rate. Since this is based on the amount of your total income and is therefore only known at the end of the year, part of your profit cannot be withheld as income tax every month, as would be the case if you were employed. As a self-employed person, you must therefore expect to pay much larger additional taxes.
In many cases, you will also be required to pay tax in advance, which you have to pay quarterly. The amount of the tax advance depends on your income from the previous calendar year and the corresponding expected tax burden. If your business situation has changed significantly in the new year, the tax advance payments will be unreasonably high or low. You should then inform the tax office of your new financial situation and ask them to adjust the amount of the advance payments.
What accounting tasks do self-employed people have to perform?
In addition to registering your business activity, you must inform the tax office of your profits every year as part of your tax return. In many cases, the so-called income surplus statement (EÜR) is sufficient for this, in which you can compare your company's income and expenses in a relatively straightforward manner and claim the difference as profit. You can always submit such an income surplus statement, provided you are not registered as a merchant in the commercial register and your annual turnover is below 600,000 euros and your annual profit is below 60,000 euros.
However, if your company is larger or you are registered in the commercial register as a company, general partnership or limited liability company, extended accounting obligations apply: you must prepare an annual balance sheet and profit and loss statement that show the entire financial situation of your company.
In addition, you may need to submit a trade tax and sales tax return if you exceed the relevant allowances, as well as applications for income tax or sales tax advance returns. If you employ staff, detailed personnel accounting is also required.
How much does a tax advisor cost for the self-employed?
The fee for a tax advisor is determined by the Remuneration Ordinance for Tax Advisors (StBVV). However, this ordinance does not specify any specific prices for the provision of certain services, but merely sets a framework for the minimum and maximum fee that a tax advisor may charge for an activity. For most services, a full fee is initially specified, the amount of which depends on the value of the item, i.e. usually on the amount of your annual turnover.
How expensive is an income statement prepared by a tax advisor?
A typical task that self-employed people are faced with every year is the preparation of an income statement. This activity is described in Section 25 of the Tax Consultant Remuneration Ordinance. Here, the value of the matter is defined as the operating income or operating expenses, whichever is greater. The full fee can then be read from Table B in the appendix to the ordinance. For example, if your company has generated annual income of 40,000 euros, the full fee is 221 euros.
The first paragraph stipulates that the fee for determining the excess of operating income over operating expenses may be between 5 tenths and 20 tenths of a full fee. In our example, the lowest possible price for preparing an income and expenditure statement is 5 / 10 * 221 euros = 110.50 euros; the maximum amount, however, is 442 euros. If the actual workload for the tax advisor does not exceed the normal amount, the so-called average fee is charged in most cases: the arithmetic average between the maximum and minimum fee, in this case 276.25 euros.
Section 25 of the StBVV explicitly states that extraordinary preparatory work can be charged at a time-based fee. For example, if you do not have any bank statements with incoming and outgoing payments and your tax advisor therefore has to carry out extensive research at your bank or in unsorted stacks of documents, this additional work would also incur additional costs. According to Section 13, the time-based fee is between 30 and 70 euros for every half hour or part thereof.
Additional tax consultant costs in the example company
For the example company given above with annual revenue of 40,000 euros, the cost of preparing an income statement is on average around 276 euros. Assuming that you had voluntarily registered in the commercial register despite the low revenue, you would then have to disclose your profits in an annual financial statement. If you commission a tax consultant to prepare an annual financial statement with a balance sheet and profit and loss statement, you would have to expect an average fee of 553 euros - about twice the price!
You would typically have to pay between 100 and 300 euros to prepare a trade tax return or a sales tax return, depending on the exact amount of your sales. To keep costs low, it is worth collecting and sorting all the important documents in advance. Then your tax advisor's work is essentially limited to adding up the data and entering it correctly into a form. If you keep the actual workload to a minimum, the tax advisor will often accommodate you and charge a lower fee below the average fee.
Please note that as a self-employed person you can no longer receive help from a tax assistance association! If you need support in preparing your personal income tax return, you must also contact a tax advisor.
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