For the self-employed worker it is important that he is aware of the tax implications and responsibilities. The employer has to provide a complete tax return form to the self-employed person in order to prove income and expenses. All this is done in order to prove liability of the self-employed person. Even if he was not employed by the company, the burden is still upon him because the tax returns are filed as an individual.
An employer usually has certain privileges including maternity, unemployment and termination pay, vacations and severance benefits and other benefits including business contributions to the health plan, pension and insurance schemes. The self-employed have to take all such risks and expenses on their own. This is also applicable if he gets married and has to provide a tax return to the self-employed partner. In many cases the self-employed are able to claim a deduction for expenses incurred with respect to home expenses such as house loan interest and insurance. However they cannot do so with respect to rent or mortgage payments. Another deduction is for expenses of travelling to work in the case of an employee who lives in a different country. However there is no tax deduction for an employee who takes time off for medical treatment at home.
There is a possibility that the self-employed worker may be entitled to claim a tax return under Section 14 of the Income Tax Act that provides a tax deduction up to 50 percent of his gross wages paid. This applies also to an employer’s contribution towards an employee’s pension plan. The employer and the employee are liable to contribute towards the employee’s health cover for an equivalent period of employment. However it is very important to obtain proper guidance from the tax authorities before taking such a step. The Self-employed worker will also have to make sure that he is filing the correct tax return and not under an incorrect method which may lead to incorrect results.