10 Common Mistakes People do While Filing Tax Returns

Mistakes to Avoid While Filing Tax

Are you worried when your tax filing due date is fast approaching? Are you unsure of what documents you need to collate in order to file your income tax return? Well, yes we understand that filing your tax return is quite a complicated task. However, when you keep a tab of a few points, you can make your tax filing process easy and hassle-free. So let’s take a look at a few common errors you can avoid when you’re filing your income tax return.

1. Declaring Your Business Income or Trade Incorrectly

If you’re a hawker, taxi driver, private tutor, or a commission agent, you’ll be indicated as self-employed. So when you’re filing your return, you need to follow the steps below to make sure you’ve declared your trade income the right way.

When you e-file your return:

You’ll need to declare your earnings as business income under section 2 “Trade, Business, Profession or Vocation".

When you opt for paper filing:

Form B: On Page 2, you’ll need to complete sections from 6 to 9.

Form B1: On Page 2, you’ll have to complete the following sections:

  • "Trade, Business, Profession or Vocation" – Item 1 of Appendix 1
  • "Other Income" - Item 3

2. When You Don’t File Your Tax Return

You haven’t received any income to declare

When you get an intimation from the IRAS to file your tax return for a YA (Year of Assessment), you’ll need to submit your tax return even if you have no income for the last year that needs to be declared.

When you opt for e-filing:

Within 18th April, you should submit your tax return. Once you’ve submitted your income tax return successfully, you’ll be given with an option to acknowledge your tax return.

When you choose paper filing:

You’ll need to present your original tax return via the return envelope that is provided to you within 15th April.

When your employer is sending your details to IRAS

Even though your firm has sent the details pertaining to your employment income to IRAS, you’ll still have to file your income tax return. You’ll not submit your tax return, only when you get the NFS (No-Filing Service) Letter.

3. When You Raise an Incorrect Claim for a Contribution You Made to CPF

There isn’t a need for you to raise a claim for CPF relief. If you’re self-employed, CPF relief will be permitted automatically depending on details the CPF Board sends to IRAS.

If you’re self-employed, CPF relief is granted only if you comply with the following conditions:

  • You should have business or trade income that is calculable.
  • You’re self-employed when you’re making the CPF contribution.
  • You made the CPF contribution prior to 31 December of the previous year.

4. Not Claiming for Tax Reliefs

Being a Singapore tax resident, you’ll need to meet certain eligibility criteria in order to qualify for tax reliefs & rebates. So before you raise a claim, always ensure that you’re compliant with the eligibility criteria.

  • If you choose paper filing, you’ll still have to claim for tax reliefs even if the amount with respect to your tax relief claim hasn’t changed from the previous year.
  • If you intend to e-file your income tax return, you don’t have to claim for tax reliefs that are mentioned in IDRS (Income, Deductions and Relief Statement). This is because the tax reliefs will be part of your tax assessment automatically. In case you want to make any changes to the pre-populated reliefs and deductions or you intend to make claims with respect to new tax reliefs or Parenthood Tax Rebate, you can use the option "Edit My Tax Form" via the IDRS page and mention your details under the section “My Tax Form”.

5. When You Miss to Click on the “Submit” Button

Do not exit from e-Filing once you’re done with checking your details under the Consolidated Statement. Instead, click on the “Submit” button to complete your tax return filing process. Also, once you’ve submitted your tax return successfully, you’ll be directed to an acknowledgement page.

6. Submitting Your Documents Which Are Not Required

You need to submit only the documents that have been requested for. You can find the list of documents you need to submit on the Acknowledge Page. You can send in your documents through an email.

7. Submitting an Income Tax Return With Errors

Let’s assume you missed mentioning about a specific tax relief claim while submitting your income tax return, you can always re-file your return (once) in less than 14 days from the date on which you submitted your tax return previously or within 18th April, whichever date is earlier.

8. Not Filing Your Form P

If you’re the Precedent Partner, you need to file “Form P” based on the income derived out of the partnership. You need to file “Form P” on the partnership’s behalf within the stipulated due date for filing. The filing deadline is 18th April and 15th April for e-Filing and paper filing, respectively.

You’ll need to intimate about the share of income each partner gets out of the partnership. Each of the partners will need to make a declaration for the share of income they have received with the help of their individual tax returns.

So who is the “Precedent Partner”?

The partner who is named initially in the partnership agreement. In case a partnership agreement is not there, the precedent partner will be the partner who is nominated and elected by the rest of the partners involved in the partnership.

So based on what conditions does a partnership have to file “Form P”?

Filing Form P is necessary if business was conducted by the partnership in that year and if the partnership has been notified by IRAS to file income tax returns.

9. Not Filing Your Form B

Even though your Precedent Partner has filed “Form P” on behalf of the partnership, you still need to file your “Form B” in order to make a declaration for the share you qualify from the partnership income or any other income you derive from additional sources (if any).

Note: Starting from 1st February, you’ll have an option to e-file “Form P”. Suppose a partnership manages to e-file “Form P” within 28th February, the allocation of the partnership will be pre-populated in the “Form B/B1” of the associated partners’. The benefits of having the partnership details pre-populated include:

  • In case you’re the Precedent Partner, you don’t have to intimate the associated partners about the share of income they will get out of the partnership individually.
  • Each of the partners involved in the partnership will have their tax return details pre-populated which in turn proves to be easy and convenient for them.

10. Filing Errors You Could Avoid While Making a Declaration and a Claim

Declaring an Estimated Income

When you’re considered as “self-employed”, you’re expected to keep a track of all your transactions related to your business accurately. You’ll not be able to file an income tax return with an estimated income, estimated expenses, or incorrect accounts.

Declaring Your Partnership Salary as Sole-Proprietorship/Employment Income

You should be declaring your partnership salary/CPF/bonus/benefits like remuneration as “Partnership Income”.

When you e-file your return: Declare your partnership salary as 'partner's salary, bonus & CPF' under section 2 "Trade, Business, Profession or Vocation" > "Partnership".

When you do a paper filing: For “Form B”, on Page 2 you need to fill in item 1b (4). For “Form B1”, on Page 2 you need to complete - Item 1 of Appendix 1 "Trade, Business, Profession or Vocation" and Item 3 "Other Income".

Declaring Your Partnership Income Incorrectly

Your Precedent Partner must notify you on the share of partnership income you qualify for and you need to declare this amount via your “Form B” before you file your tax return. You should not proceed to file your tax without declaring your partnership income in Form B. On the other hand, if you are unaware of your partnership income, you should not instead declare the total partnership income.

If the Precedent Partner of your partnership e-Files the Form P for a YA by 28 February, your income/allocation will be automatically populated in your Form B, without you having to worry about finding out your partnership income separately.

Declaring Partnership Rent Incorrectly

You should not be declaring your portion of income with respect to partnership rent as “other income”.

As an e-filer, you need to declare it under section 2 “Trade, Business, Profession or Vocation" > "Partnership" > "Other Income and Donations from this Partnership" > "Rent".

In the case of paper filing, you need to complete the following items:

  • For “Form B”: On Page 2, you should fill in item 1b (6).
  • For “Form B1”: On Page 2, you should fill in item 3 "Other Income” plus item 1 of Appendix 1 "Trade, Business, Profession or Vocation".

Using Form B to Claim the Partner’s Expenses

You can only make a claim for the partner’s expenses that have resulted solely during the generation of income from your partnership. Also, you must ensure that you haven’t raised a claim already versus the income from your partnership in the “Form P” or any other income you earn.

A few examples of approved expenses include:

  • Any subscription you’ve made to a professional organisation that isn’t paid by the partnership company.
  • The interest you’re liable to pay for a loan you took in order to make an investment in the partnership.
  • You’ve opted for public transport in order to commute for business-related reasons (example: taxi fare) which is not paid by the partnership firm.

A few examples of expenses you cannot claim include:

  • Entry charges and a subscription to a social private club.
  • Any expense that occurred because of you using a private vehicle in order to commute. You cannot raise a claim even if your commute was for a business-related purpose.

Using Form P to Claim the Partner’s Salary

In Form P, you cannot include partners' salary, CPF, and bonus under the section “Allowable Business Expenses”. You should include it under the section “Partner's salary, Bonus & CPF”.

When You Choose to Not Declare Your Rental Income

When you receive income in the form of a rent payment when you rent out your property, you will be liable to pay income tax for the rental income you receive. Your rental income will be inclusive of your complete rent amount and any pertinent payments you get while your property is on rent.

You should make a tax declaration for the previous year’s gross rent of your building and also the details of deductible costs of every single property under the section 'Other Income: Rent from property' in your income tax return.

You will need to include the following details:

  • Complete rent you’ve collected annually.
  • Sum of all deductible costs.
  • In case you own a property that is jointly owned you will need to include the portion of the rent amount you receive individually.

When you submit an incorrect income tax return to IRAS without reporting your rental income, you’ll be liable to pay a penalty. In case you make a disclosure voluntarily within 1 year (grace period) starting from your official filing date, there are chances that IRAS might decide to waive your penalty charges.

When You Choose to Not Declare Your Overseas Income

You will be liable to pay income tax on your overseas income in the following scenarios:

  • You either have a business or trade in Singapore and you’re supporting a business or trade overseas that is in connection with your trade in Singapore.
  • Your overseas official duty is related to your employment in Singapore. As a part of your Singapore employment, you were asked to travel overseas.
  • You’re employed with a foreign firm in Singapore.
  • You earned income in Singapore via a partnership that was made in Singapore (not taxable if the income is eligible for tax exemption).
  • The overseas income you’ve earned is the pay you’ve received for the employment duties you delivered in Singapore.
  • You got overseas service income (not taxable if the income you received is eligible for exemption).
  • You have an employment out of Singapore on behalf of the Singapore government.

You should make a declaration of the overseas income that is taxable under section “trade income” or “employment income” as per what is applicable for your income tax return.

Filing your income tax incorrectly can lead to excessive penalties and stringent action from the IRAS. If you have made an error while filing your taxes, you must rectify them by re-filing your tax at the earlierst or contacting the IRAS for further assistance.

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