How NOT to succeed as an "Atzmai"

This is one post that for several reasons, I'd rather not be doing. However it was prompted by my friend Gidon's post, titled, "How to succeed as an Atzmai" and "How much money should you aim to make as an Atzmai"



As usual, I apologise for my unprofessional writing style.



An Atzmai, for those who don't know, is someone who is self-employed and may or may not, employ others but doesn't operate under a company structure.



As Gidon wrote, the process of opening a file with the Tax, VAT and Social Security authorities are fairly straightforwards. The problems arise gradually and innocuously.



I think it is a mistake to rate how much money one wants to make, against the tax levels one has to start paying from. Obviously, it is natural to want to earn as much as possible, and certainly more than if one was to do the same job for a wage. Otherwise there would be no point to being self employed.



The factors to think about besides what levels of earning one pays tax at (and whatever I write here is more than likely far from complete), include



1. Day to day living - Food, clothes, entertainment, holidays etc

2. Permanent expenses - Mortgages, Rates, electricity, gas, water, school fees, phones etc

3. Insurances - Health, life, house, car

4. Savings - Kids (weddings, Bar Mitvah's), Pension (we all get older and want to make sure that whoever is going to wipe our arses etc will have some respect)

5. Taxes



Then of course, once one has a budget, there's the question of making sure that the minimum amount that we need is really going to come in each month and what will you do if it doesnt.

Of course we are talking about an average person who has not inherited money and doesnt have a rich daddy.



OK, so now you have a budget, you are confident that you've got a clientelle and you go to the authorities and open up files.

You start working, but sooner or later, clients are late paying, or you've got a slow period. You still have to pay your taxes, and if you earned "X" for the last few months, and now you declare half that amount, flags will be raised and you may be audited. Do you have the time or the experience to answer the sort of questions you will be asked? Because the first assumption the tax authorities have is that you are hiding income.



Then of course, there's the stage that most people get to especially after the first audit (or "friendly interview") and thats like a self-fulfilling prophecy. You get some income, and dont write a receipt (for any number of reasons). You rent out a part of your house, you declare expenses that you think are legit, but are not. I know, this all sounds like something that any intelligent person would be careful not to do right? But I can assure you that there are lots (and lots) of people sitting in the country's jails, who are inherintly decent people, who got caught up in a cycle of trying to delay payment of taxes to keep their heads above water "just for a while" and then fell deeply into the tax avoidance pit. More often than not, its the small income self-employed who fall into this category, simply because of the temptation of trying to save by doing things themselves.

Of course I am not saying that its not worth being self employed. It can be. BUT....I am definitely saying that its not worth dealing with the tax authorities unless you are a professional. You would not treat yourself medically from reading an encyclopaedia, nor would you represent yourself in a court of law....people do, sometimes successfully, but many times with disastrous results.

Budget in the cost of an accountant/book-keeper. The rules change all the time and if you want to be able to concentrate on the important things (like keeping your time for working and relaxing and not on dealing with authorities), don't create a stumbling block for yourself. The professionals stop you from making mistakes and allow you, when questioned by the tax authorities, to refer all questions (and responsibility) to them.

Again, this is just my own opinion for what its worth.