5 Tips For Filing Income Tax As a Freelancer in Singapore

On 28 Feb I got an SMS from IRAS inviting me to e-file my taxes anytime from 1 Mar to 18 Apr 2022.

Any normal person would wait until the last day, but not me. Because 2021 was the year I transitioned from full-time employment to freelancing, I was excited to finally file my income tax as a freelancer. I held out as long as I could (11 whole days!) and caved.

Here are 5 tips for anyone who’s filing income tax as a freelancer in Singapore. (Some are from mistakes and regrets I made along the way.)

1. Um, declare your income?

Okay, I might be stating the obvious here, but I know some people who don’t declare their freelance income, especially if they also have full-time employment.

While it’s not very likely that IRAS would put the resources into hunting you down, it’s still tax evasion. I declared mine, mostly because I want to sleep at night.

By the way, this year you can’t accidentally “forget” to declare your freelance/rental/whatever income. IRAS has upgraded their tax portal UI to purposely lead you to enter any non-employment income. I don’t blame them. Lawrence Wong did repeatedly say during Budget 2022 that we need $$$ for upcoming social spending right?

2. Plan for your income tax bracket

People with regular income don’t need to do this because they just calculate their monthly pay to find out which income tax rates apply. Freelancers should, though.

• If you earn up to $20K a year: you don’t have to pay taxes

• If you earn $40K a year: you pay at most $550 income tax

• Any income above $40K: subject to 7% tax

So, if you earn $80K, income tax on the first $40K is $550, while the next $40K incurs $2,800. NOT GOOD! You probably want to get your assessable income as close to $40K as possible.

I didn’t have a proper game plan in 2021, so my freelance income pushed me above the $40K “safe zone” and resulted in a rather oversized tax bill.

3. Be selective and/or charge more

I was a complete n00b at freelancing so I didn’t do either. I took on some jobs paid badly and weren’t pleasant to do. They weren’t worth my time at all. And now, to add insult to injury, I have to pay additional taxes on those jobs!

If I could do it again, I would have carefully assessed each job by asking “do I want to pay taxes on this bullshit?”

At the very least, I would have charged higher fees and made sure I was making enough AFTER tax. I would not have been so pressured by what other freelancers charge — after all, they might not even be declaring their income to IRAS...

At least I have learned my lesson. If only such “tuition fees” could be claimed under Course Fee Relief.

4. Track your income & expenses

As a freelancer, you’ll be prompted to fill in 2 line items when filing taxes: your gross revenue and income after deducting expenses.

I track my freelance jobs and income on a Google Sheet. It’s nothing fancy, but it does the trick. On a separate sheet, I record my expenses. This lets you avoid a last-minute scramble for numbers — and also helps you eyeball your assessable income so you can save for your tax bill early.

I highly recommend getting familiar with IRAS’ list of allowable business expenses and seeing what you can rework to make your business more tax-efficient. For example, it might be better to register your company and hire yourself as an employee. But I guess your income needs to be high enough to be worth the hassle.

5. Know which tax reliefs to use

If you know your assessable income will exceed the safe zone, then plan your tax deduction strategy using this list of IRAS tax reliefs.

Some of these aren’t within your control (e.g. family members), but the 3 most foolproof methods are CPF top ups ($7,000), SRS account ($15,300), and donating to charity (no limit, except for the total tax relief cap of $80K).

I regret not topping up my CPF SA or SRS last year to trim down my assessable income. Looking back, it was totally a missed opportunity. Since I was working full-time for most of 2021, I wouldn’t even have missed the money. I should have done it as a favour to my 2022 self.

Also, I should have donated to charity instead of putting it off because I couldn’t decide on a beneficiary or how much to donate! With 2.5X tax deduction, it should’ve been a no-brainer.

When is income tax payment due?

Since I filed my taxes online, I got my income tax bill right away. It said TAX PAYABLE BY 26 MAY 2022. I checked my sexting history with IRAS and last year’s income tax was due on 27 Mar 2021. So I guess it’s safe to say that income tax payments are due by end of May.

There are a few ways to pay your income tax bill, but the easiest ones are GIRO, PayNow, or iBanking.

Paying by GIRO gives you the benefit of an interest-free 12-instalment plan option. Those facing financial difficulty can request a longer payment plan by logging into IRAS website and going to ‘Apply for Payment Plan’ or contact IRAS to discuss.

I paid by DBS iBanking’s bill payment feature (instructions are here). Yeah I know, I’m a baller.

Seriously, the income tax thing had been hanging over my head over the past 6 months and I really wanted to get it out of the way. Before I left my full-time job, I started estimating my potential tax bill and setting aside enough cash to cover it. That’s why I have enough to pay it immediately.

It’s a bit painful to part with so much cash, but I’m glad can finally close the book on last year. Goodbye 2021; you sucked.