The Most Common Tax Mistakes Made by Freelancers

Did you know that many freelancers make mistakes due to lack of knowledge or poor organization? The most common tax mistakes made by freelancers are usually related to deadlines, deductions, and changing regulations, and can be avoided with minimal planning.

In this article, we break down the most frequent mistakes so you can avoid them from the start and plan ahead. Whether you are just starting out or have been a freelancer for years, this review will help you optimize your tax situation.

Mistake 1: Filing taxes late

Meeting the deadlines set by the Tax Agency is one of the main obligations of the self-employed. Often, due to lack of organization, ignorance, or simply stress, many professionals do not file their taxes on time. This results in surcharges, interest, and, in serious cases, penalties that can seriously affect the business’s cash flow.

Keeping an up-to-date tax calendar and using digital tools can make a big difference.

How to organize yourself to meet deadlines

To avoid missing deadlines, the first thing you need to do is find out exactly what your tax obligations are: quarterly returns (form 303 for VAT, form 130 for income tax, among others), annual summaries, and installment payments.

It is also advisable to hire a tax advisor or accountant, especially if your business is complex or you manage a lot of invoices. Automating administrative processes using specialized software saves time and reduces human error, ensuring that you always meet your deadlines.

Mistake 2: Incorrect deduction of expenses

Deducting professional expenses is a right of the self-employed, but it is also a common source of errors. Many professionals declare expenses that the tax authorities consider personal, which can lead to penalties in the event of an audit. Others, out of fear, do not deduct items that are deductible, thus losing tax benefits.

Knowing exactly what you can deduct and having documentary evidence for each expense is key. The main criterion of the tax authorities is that the expense must be directly related to your professional activity.

What expenses can you deduct and which ones can’t you deduct?

You can deduct:

• Office materials and supplies.

• Transportation expenses directly related to your activity.

• Professional services contracted (lawyers, designers, programmers).

• Coworking or office rental expenses.

• Training related to your activity.

You cannot deduct:

• Clothing that is not a uniform or that can be worn outside the professional environment.

• Meals without commercial justification (without a client or supplier).

• Vacations or trips unrelated to the activity.

Always keep the invoice, not just the receipt, and make sure that your name or your company’s name appears as the recipient.

Mistake 3: Applying VAT incorrectly on your invoices

VAT is a complex tax that varies depending on the type of service, customer, and location. Applying the wrong VAT rate or not differentiating between VAT charged (what you charge) and VAT paid (what you pay) can lead to accounting discrepancies and problems with quarterly settlements.

It is also common to overlook VAT-exempt transactions or special cases such as reverse charge or intra-Community transactions.

Key differences between charged, paid, and exempt VAT

• Charged VAT: This is the VAT you charge your customers. You must pay it to the tax authorities on a quarterly basis.

• VAT paid: This is the VAT you pay on your purchases and services related to your business. You can offset it against the VAT charged.

• VAT exempt: Some services (educational, health, financial) are exempt. They are not charged or deducted, but they must be declared.

Correct application of VAT depends on clear invoicing, with well-defined items and correct tax rates. It is essential to review the current regulations and consult an advisor if you have any questions.

Mistake 4: Not keeping up to date with your accounting

Many self-employed workers accumulate receipts, invoices, and bank transactions without recording them in an orderly manner, which complicates the end of the quarter and increases the risk of errors. Outdated accounting is synonymous with poorly informed business decisions and a higher likelihood of tax problems.

Keeping your books up to date is not only a legal obligation, it is also a tool for understanding your profitability and making better decisions.

Basic accounting obligations for self-employed workers

Depending on the tax regime, you may be required to keep:

• Income and sales ledger.

• Expense and purchase ledger.

• Investment assets ledger.

• Book of invoices issued and received.

In addition, you must keep all documentation for at least 4 years. Using accounting software or working with an advisor allows you to keep everything in order and avoid mistakes in your tax returns.

Mistake 5: Registering late or under the wrong tax regime

One of the first serious mistakes occurs when starting a business. Not registering with the tax authorities or doing so under the wrong heading can have consequences from day one. It is equally important to choose correctly between direct assessment or modules, as this determines how you are taxed and how much you pay.

Many new freelancers choose their tax regime without knowing its real implications, which can lead to overpaying or unintentional non-compliance.

How to choose between modules, direct assessment, and other regimes

• Simplified direct assessment: Ideal for most freelancers. You pay tax on your income minus your actual expenses.

• Modules: Only available for certain activities and below certain thresholds. You pay a fixed fee based on objective parameters.

• Normal direct assessment: For income over €600,000 per year.

It is advisable to run simulations with an advisor to see which regime is most advantageous for your activity, income forecast, and type of expenses.

Other common tax errors (but not so obvious)

There are other less visible errors that can also lead to penalties, especially in international transactions or irregular income. They are not as common as the above, but they are dangerous if not controlled.

Let’s review some of the most important ones that you should avoid from the outset.

Not declaring intra-Community transactions

If you buy or sell services to companies in the European Union, you must register with the ROI (Intra-Community Operators Register) and declare these transactions on form 349. Many self-employed people are unaware of this and omit this step.

Failure to submit form 349 may result in penalties even if the amounts are correctly declared on your VAT return. In addition, if you provide digital services to European consumers, you must register for the OSS scheme to manage VAT correctly.

Forgetting to declare small or sporadic income

Any income derived from your activity, however small or occasional, must be declared. A common mistake is to assume that if something does not exceed a minimum threshold, it does not need to be included in your quarterly returns.

The Tax Agency cross-checks bank details and can detect undeclared income, even if it is only a few dollars. Keeping accurate records of all payments, even those for which no invoice is issued, is essential.

Exceeding limits without adapting your tax regime

As your business grows, you may exceed certain limits that change your tax regime. For example:

• Moving from modules to direct assessment.

• No longer being able to apply reduced withholdings.

• Having to file new forms (such as 111 or 190).

Failing to adapt your tax situation to your new circumstances could mean paying more tax or being penalized for failing to fulfill your obligations.

Learn about the most common tax mistakes made by freelancers and how to avoid them 

The most common tax mistakes made by self-employed workers are not the result of total ignorance, but rather a lack of planning and control. That is why it is vital to regularly review your obligations, seek professional help if necessary, and rely on technological tools.

Avoiding these mistakes will save you money, reduce risks, and help you have a smoother relationship with the tax authorities. The most common tax errors made by self-employed workers can be prevented with a few small, well-planned actions.

Frequently asked questions about tax errors made by self-employed workers

In this section, we answer some of the most common questions among self-employed workers regarding tax errors, deadlines, and advice. Good management starts with knowing your rights and obligations.