Filling out your taxes can be a complicated process. There are a lot of forms to fill out and a lot of numbers to remember. But one of the most important things to remember when it comes to taxes is to avoid making mistakes.
Making even a few simple mistakes on your taxes can lead to penalties and interest, which will further complicate your tax situation.
1. Not Filing On Time
If you haven’t filed your taxes by the deadline, you may be subject to penalties and interest. It’s best to get your taxes done as soon as possible so you don’t miss any important deadlines. Filing on time also reduces the chance of becoming subject to an audit. If you think you might owe money, you can get your taxes done ahead of time so you don’t have to worry about making mistakes when it’s time to file.
2. Filing The Wrong Form
If you file the wrong form, you can still make amendments. However, if you choose to ignore the IRB(Inland Revenue Board)’s request, the IRB will come knocking on your door. Filing the wrong form is a simple mistake that can be easily corrected. All you have to do is fill out the correct form and file an amendment with the IRB.
If you’ve noticed you made a mistake, you must submit an amendment within 6 months from the tax deadline. Which means before the tax deadline. Write a letter detailing mistakes made & enclose supporting documents.
Submit an Amended Return Form(ARF) to the branch that handles your tax file.
3. Not Paying/Understating Income
Ever thought of avoiding tax payments? Maybe even considered 'forgetting' to submit your taxes, or declaring a smaller income than your actual income.
Please avoid these things at all costs. Anyone found guilty of tax avoidance might face a fine, imprisonment, or both.
4. Over Claiming Tax Relief
Never overstate the amount of tax relief you're entitled to. This may lead to penalty charges or even imprisonment.
5. Claiming Tax Relief For Unrecognised Donation
If you claim tax relief for a charitable donation that you haven’t identified, this may cause you to overstate your income. This is a common mistake among individuals who are unsure of which tax forms to file. You can avoid overstating your income by avoiding claiming tax relief for unrecognised donations. Only donations made to government organisations or recognized charitable organisations can be used to claim tax relief.
6. Not Keeping Your Supporting Documents
According to the Income Tax Act, we need to keep all of our supporting documents or receipts that we have used to claim tax relief for at least 7 years. You may snap a photo or scan it in case the colour fades over time, otherwise IRB reserves the right to report you for failure to submit proofs.
7. Showing Off Your Wealth On Social Media
IRB has a team that prowls social media sites in the search for taxpayers who might not fully declare their income to IRB. They could call you for an audit if they think that your lifestyle doesn't match the income you've declared.
8. Mixing Personal And Business Income
For employed individuals who have both business income and salary income, it is crucial to separate both incomes properly. You could consider engaging a tax agent to make it more efficient in legally reducing your tax payable.