Tax season is once again upon us đź’° Some of you would have received your EA forms this week and might be anxious about the filing process – wondering where to start or trying to remember everything from the year before.
Well, here are some common mistakes that most of us might have done or might do when it comes to our income tax 📝👇🏼 Go through the list carefully and don’t hesitate to reach out for help if you need it.
1. Misplacing Your Receipts or Supporting Documents
Most of us generally throw away most of the receipts that we have because we don’t know how important they can be – for income tax declaration.
According to the Income Tax Act, we need to keep all supporting receipts or documents that are used to support our income tax declaration for 7 years from the date of filing.
2. Not Understanding How Tax Relief Works
Most taxpayers are entitled to an exemption on their tax returns through reliefs. However, these are subjective and can vary from individual to individual. The list of reliefs might also change on an annual basis.
Two main mistakes:
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Not taking advantage of the tax reliefs that have been outlined to help reduce their tax payable.
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Claiming for reliefs that are not applicable to you
3. Under-Declaring Your Income
Many people, especially those who are not earning fixed salary, do not declare their side income. This includes landlords who rent out their property to their tenants.
Yes, you have to declare all your income that has been outlined under the Income Tax Act. Even if your side income is small compared to your main income (salary from employment), you still need to declare it.
4. Showing Off Your Wealth on Social Media
LHDN actually has a dedicated team that prowls social media sites looking for people who might not have fully declared their income to LHDN.
Showing off your luxurious lifestyle and designer items might be a bad decision for you to make, especially if you haven’t declared your income properly to LHDN.
5. Not Separating Your Personal and Business Income Effectively
For those that have side hustles, or businesses, in addition to employment income, it is very important that you separate your personal and business income properly. Any drawings from your business to you might be considered an income and you will have to declare it and will have to pay additional tax on that amount.
For those in this situation, you might want to engage a professional tax agent who can plan both your personal and business taxes more efficiently so that you can legally and effectively reduce the amount that you pay to LHDN in terms of income taxes.
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