When filing your tax returns, it’s essential to make sure you don’t make any mistakes that could cost you money or result in an audit by your revenue administrative body. The Inland Revenue Authority of Singapore, IRAS, gives several warnings about common mistakes people in Singapore make when filing their taxes. Most small business owners use accounting software to file their taxes to keep things simple. But even with software, there are still common tax filing mistakes you can make that will cost you money and stress. Here are seven of the most common tax filing mistakes and how to avoid them.
1. Not Keeping Records and Staying Organized
If you’re in business, you have a lot of expenses to take care of to keep your business going. However, it’s essential to document these expenses to include them as deductions where applicable when tax time comes around. Keep a running list of all your business-related expenses. It will help keep you organized and save time when it comes time to filing your tax returns. And remember, there are different types of records you should be supporting: receipts, credit card statements, invoices, and bills.
For professional guidance on organizing your finances and tax documents, consider consulting for tax services with a reliable tax solutions company like BoardRoom. They can advise how best to structure your finances for maximum benefit come tax season. Also, know what deductions are available for your businesses; some may surprise you!
2. Not Using the Right Filing Status
When filing your taxes, you must select an income tax filing status. Your marital status will dictate which one of these statuses you must use: Single, Married Filing Jointly, Married Filing Separately, or Head of Household. Some taxpayers incorrectly file returns because they get confused about which category applies to them.
Determining your correct status can help prevent mistakes and ensure that you receive all of your tax benefits. For example, if you’re married but file as single on your return, it could cost you thousands in lost deductions and credits. If you’re unsure which filing status is correct for you, consult a professional for tax services. Consulting for professional services helps you avoid costly errors.
3. Forgetting Tax Deductions or Credits
The most common tax filing mistake people make is forgetting a necessary deduction. A tax professional will tell you a deductible is anything that reduces your taxable income. Be sure you take deductions for any job-related expenses and capital losses. Remember that some costs may be considered more than one type of deduction.
For example, if you work from home, your rent or mortgage payment might qualify as a business expense and be considered part of your household. If you’re self-employed, allowable deductions can include health insurance premiums and contributions to your retirement plan. It’s worth checking out what tax breaks are available where you live—it could save you hundreds or even thousands of dollars.
Allowable deductions depend on several factors, such as whether you itemize or claim the standard deduction and whether your state offers any additional local deductions. If you don’t know about these options, now is a good time to talk with a tax professional at BoardRoom tax services.
4. Chasing Refunds Rather Than Paying Back Taxes
If you’re in a position where you owe money for previous tax years, it’s easy to get distracted by possible refunds and forget about paying back what you owe. Rather than attempting to recoup money for old taxes, pay them off directly. Even if you can only pay a small amount each month, the sooner you start your repayment plan, that’s better than getting sidetracked by looking at how much a refund you might be eligible for.
Also, keep in mind that if you end up owing more after filing your return, penalties will accrue until you pay them off. However, BoardRoom tax professionals are here to help make sure you follow all IRAS guidelines so that you don’t incur charges with additional fees or penalties. They will also help you identify instances where refunds may be applied to reduce your tax burden. It is important to note that these mistakes may also result in an audit, leading to fines or other legal action.
5. Failing to Sign Your Tax Returns
Appending an electronic signature on all your tax documents that require a conventional signature is essential. If you do not sign and date your return, IRAS will reject it. Furthermore, if you are using software, remember to save and print off a copy of each signed document for future reference. If you have forgotten to sign and date your returns, there is still time to amend your records.
However, keep in mind to file amended returns within specific due dates. Contacting a professional in tax returns would be ideal so they can help you submit a complete and accurate return on time. It’s important to note that penalties may apply if you file your taxes late, so get in touch with a tax filing professional as soon as possible!
6. Inaccurately Claiming Donations as Deductible Costs
Donations are a great way to save a little extra money on your taxes. However, it would help if you claimed only donations that fall under your line of work or profession. Anything outside of what you usually do is not tax-deductible, and you shouldn’t claim as such.
If you file your taxes with inaccurate deductions, you might get fined. Make sure to research any expenses before claiming them on your return. To avoid making costly mistakes, a professional from BoardRoom tax services can help you determine which costs are deductible and which ones aren’t.
7. Unreported Income and Itemizing Expenses Without Receipts
We’ve already established that you should keep good records throughout the year. But what about when it comes time to file your taxes? An accurate statement of your income and expenses is critical in filing an accurate tax return. Ensure you report all income beyond your employment, such as interest, dividends, rental income, alimony, or freelance earnings. Also, don’t forget those work-related or unreimbursed business expenses—from travel costs to equipment purchases deductible from your taxable income.
However, if you itemize your expenses, ensure you substantiate them with receipts before claiming them on your return. Otherwise, they may not be allowed. Even if you have receipts for business expenses, remember that many standard deductions have strict limits. For example, suppose you own a home office and use part of it exclusively for business purposes. In that case, there are limitations on how much of your mortgage interest and property taxes you can claim as deductions.
8. Failure to Collect Your Employment Tax Form
Also, you need to ensure you receive IR8E from your employer or 1099-MISC from any contractors or freelancers you worked with and report these income sources on your return. If you don’t include any earnings on your tax return, they could result in an audit or penalties. A reliable tax solutions expert like BoardRoom tax services professionals can help ensure you file a correct tax return to get every deduction.
While filing your taxes can be a headache, it doesn’t have to be. Paying close attention will ensure you are on the right side of your tax authority and receive all of your tax benefits as you avoid costly mistakes down the road. It is important to note that tax matters can get complicated quickly. Hence, if you have any questions or concerns regarding your tax situation, don’t hesitate to contact a professional in tax services like the BoardRoom for guidance. Happy filing!