Many people find it difficult to manage their taxes. It is important and compulsory for a taxpayer to file an income tax return (ITR) to the BIR. The returns describe their income over a specific period, like quarterly for VAT or yearly for annual income. Those who earn income beyond the tax shield of P250,00 are required to assess that income, report it, and pay corresponding tax dues to to avoid penalties.
The tax authorities can determine how much you owe in balance and how much you have already paid in advance tax (through tax deducted or collected at source) with a properly filed income tax return. However, many people make honest mistakes like wrong supporting evidence or errors in calculation due to faulty accounting. Tax services in Manila state this won’t exempt anyone from penalties.
Here are the ten mistakes you should avoid making when preparing and filing your income tax returns to prevent problems in the BIR.
1. Lack of financial information
If you have incomplete data, the assets, and liabilities you have in real time will not match what is written in the books. Not only does doing so result in errors in one’s tax records, but it also raises the likelihood that you will receive a tax notice or love letter for audit from your regional district office (RDO). Hence, to mitigate this problem, accounting services in the Philippines said that you should pay attention to your accounting and bookkeeping practices throughout the year, not just when the April deadline is near.
2. Incorrect or incomplete information on ITR forms
Even though it’s a common error, forgetting to write down some information or entering the wrong information all together is a mistake that can be fixed, but it will cost you time and effort. Double-check everything you’ve written down. Check to see that important details like your TIN, name, business name, registered address, RDO, etc., have been written down correctly.
3. Incorrect calculations
The law governing tax permits a vast array of deductions and exemptions. The BIR may have to audit the business because of miscalculations on the ITR. In addition, submitting a miscalculation will result in fees and penalties. Make sure to always audit your accountant’s work and calculations to avoid this scenario.
4. Incompatibility with other tax declarations
The BIR can send you notice requesting clarification if there is any discrepancy between information you provided on your previously submitted income tax return and the information in your tax records. Therefore, you should always check to see that the figures you have recorded on your tax returns match the amounts declared on other tax returns.
5. Unfinished attachments
When claiming tax credits, don’t forget to include the necessary documentation. Ensure that you have the appropriate evidence to support your eligibility for tax credits or deductibles.
6. Declare deductions beyond what is allowed
You and your partner tax and accounting services must exercise caution when claiming allowable deductions and avoid going overboard. There is a limit on some expenses. Keep in mind that you cannot deduct personal expenses on taxes.
7. Undisclosed income sources
Your tax return should include all income earned or generated outside of your registered line of work or business. Keep in mind that additional income may still be subject to taxation to varying degrees, and the amounts may vary. Therefore, failing to declare this could lead to RDO audit and investigation. This will raise a red flag with the BIR for tax evasion.
8. Using the incorrect forms
Using the wrong form is a common mistake made by taxpayers, especially those who wait until the last minute to prepare documents. Moreover, revisions and additions to tax codes are possible at any given time. Consequently, you should keep up to date on any changes so that you don’t fill out the wrong ones and waste time trying to fix it. You can check the REVIE chatbot for clarification.
9. Poor management of deadlines
The importance of meeting income tax deadlines is emphasized by wealth planners. It goes without saying that you could face a penalty if you don’t submit your ITR in time. Those who fail to submit on time face late payments and potential interest arrears. And being consistently late is a major red flag for the BIR. Keep yourself in good standing by keeping up with all the deadlines.
10. Falsely filing a claim
When you sign your tax returns and file them, you say that all of the information is accurate and made in good faith. Therefore, if the BIR discovers information that has been intentionally manipulated for personal gain, you run the risk of losing a legal battle or your business.
Utilize the assistance of a reputable CPA firm to avoid receiving a lawsuit from the BIR for fraud and tax evasion. This will also prevent paying late payment penalties and fees. Seek help from accounting services in Pasig to prevent mistakes and ensure tax compliance.