One of the major responsibilities of a good Singaporean citizen is to pay all the taxes on time. Whether you are a homemaker or a business owner, you should pay your personal and business taxes accurately and on time. But while you pay your taxes and file them, you must avoid the common yet costly mistakes so that everything is on point.
Maintaining Poor Tax Records
Bad records management can have many negative consequences. It is necessary to track everything accurately in your business in order to keep your taxes and budget concerns in order. No matter how big or small your company, you need to have a records system in place. If you do not keep accurate records, you can end up facing the following consequences:
- You will not have a reliable record of your past to help you make day to day business decisions.
- Exhausting your budget and spending more than your incoming funds. This can result in problems with suppliers, payroll, utilities etc.
- You will likely miss deadlines, leading to late submissions and potential penalties.
- An inability to supply information to your bank or mortgage lender on time, resulting in you not getting necessary financial help when needed.
- A stressful situation may get very stressful tax submission dates to draw near. Poor records can result in underpaying or overpaying your taxes.
- Too much time spent locating misplaced files. You will upset and disappoint your clients if you cannot access their information on time.
Deducting Startup Costs Wrongly
Generally, the expenses incurred prior to the commencement of business are not tax-deductible. Deductible expenses are only those that would have been allowed if incurred after the business began operations. A tax consultant in Singapore can always help you to determine which deductions are allowed in your specific case.
Failing to Differentiate Expenses
Business expenses are defined as the costs incurred while running your business. You can only deduct allowable business expenses – do not try to deduce anything else. However, many business owners confuse their business expenses with their personal and private expenses, a mistake that results in them claiming everything as deductible expenses. The IRAS audits tax returns and imposes penalties when there are errors, omissions and discrepancies for submission of incorrect returns.
Not Declaring Your Overseas Income
According to the law, income earned abroad by the Singapore-based individuals working for the Singapore-based employers needs to be considered while Singapore tax filing. Government employees who often go abroad for the Singapore government is an example of such taxpayers.
Understating Your Income
Sometimes companies accidentally may omit certain receipts or invoices documenting a sale. This omission is not looked on favourably by the tax authorities and is taken to mean that you are deliberately understating your income in order to escape paying more taxes. This is a costly mistake, which may well result in penalization of your business. Other common mistakes made by companies in Singapore include passing non-deductible expenses as deductible ones, stating incorrect expenses, and a failure to maintain records for at least five years. For these reasons, proper bookkeeping and hiring competent accountants who are well-versed with the land’s tax laws will be worth it, particularly if you are new to the country.
Not Including Your Rental Income
When the law states that all your income is taxable, it also includes the rent you collect from your property. You need to itemize it, describing all the circumstances if you are charging extra for the extra facilities provided. Do not forget to mention total gross rent from your property. If you own an additional rental property or rent a particular portion of your apartment, you need to mention it in your additional income sources.
Not Differentiating Between Business and Personal Expenses
Self-employed taxpayers need to be really careful when it comes to Singapore tax filing. Take care not to mix the personal expenses as your business expenses. They need to give all their business expenses, which they want to claim as deductible expenses. Deduct the cost of doing business and allowable business expenses from the profit from your business to arrive at the final figure on which you have to pay tax. It is a great habit for self-employed individuals to keep a detailed record of their income and expenses.
Not Filing Proper Apportionment for Parent Relief
If you are supporting your parents above 55 years of age with their annual income under the eligible limits, you can claim Parent Tax Relief. However, if you have siblings who contribute a certain amount in supporting the parents, it is important to setup apportionment in parent relief claim. If you fail to do so, the Comptroller of Income Tax will split the relief equally among all the claimants.
Reporting Tax Based on Estimates
When you file your taxes, make sure that they are well supported with the documents. IRAS demands evidence or proof in support of your claims. So be farsighted and keep all your receipts and invoices whatever the amount. Yes, Singapore tax filing is a tricky subject and is better left to the accountants.
These mistakes may seem very small, but they can lead to costly late fees and penalties. It is better to be vary of these right from the beginning and try to avoid them so that you don’t end up paying extra for anything.
Stuck with your tax notice and unable to pay? KBB Credit will be able to help you solve that issue. Licensed by Ministry of Law to operate as a moneylender, we have been in the industry since 2010.
Let us help you solve your issues today. Contact us via this form or you can call us at 6255 6998 to find out what we will be able to do for you.
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