Tax thread: Employees vs independent contractors.

1. Legally, the two terms are mutually exclusive and are direct opposites... https://t.co/jR0PBMp32M

Employee works for an employer.
Independent contractor is basically an entrepreneur.

2. This highlights two key points:

An employer has some measure of control over the employee.

An "IC" (short for independent contractor) is "his own boss".

It is the responsibility of the employer to determine that a person is either an employee or an IC.

3. Where does PAYE come into play? PAYE is deducted from remuneration. Remuneration applies to employee earnings, whereas for IC's (on certain conditions), their earnings can be excluded from remuneration and therefore no PAYE.

This difference is the scenario of yesterday.

4. There are two important tools: Statutory tests and common law tests. They can be used to determine employee/IC status.

The statutory test is to see if a person is independent from 1: the person paying them;
2 who the work is done for

AND

5. Whether the person is subject to two main things: Control, OR
Supervision

If the person is not independent from the employer (for both the work and the pay) AND the employer has control or supervision of the person - PAYE will apply.

Tax Thread for Influencers/Freelancers - Managing Finances:

Open a separate bank account, where all your freelance/bus income gets paid to and where you pay business transactions from.

This not only makes accounting easier, but shows the monthly profit you're making.

1. Freelance income, especially when you're booked with an agent will normally have a 25% deduction and the 10-15% agency fee.

Be sure that you deduct the agency fee as an expense against your freelancing income, as well as the other business related expenses.

2. If you travel (by car) a lot for business, keep a logbook. There are many apps and websites that can do the tracking automatically, using the GPS on your phone.

When you have lots of motor vehicle expenses, the logbook will allow you to claim a % of that expense.

3. Set aside 10 - 20% of your non-PAYE income for provisional tax payments, or for the annual tax payment. The reason for this is that non-PAYE is not covered and many people spend all the income, leaving them panicking when they need to make a large tax payment.

4. The more business related expenses you have, the more you can claim against SARS, but do note that EXPENSES ARE MORE EXPENSIVE THAN TAX.

Tax is always a % of an expense. See example in note 5