Five Things to Remember When Filing Your Taxes

We all know how it feels like to deal with tax. Filing taxes is hard enough; we cannot afford to make mistakes. If you forget to declare something, you could be facing serious issues. Of course, if your annual income is less than RM34,000, you do not need to pay any tax. 

The best thing you can do before filing your taxes is to have a checklist to make sure you cover everything. Here are five things you should pay attention to when filing your taxes:

1. Bring out all the relevant documents first

If you are an employer, you should know that it is mandatory to submit Form E via LHDN's e-Filing.

So, if you are filing taxes through e-Filing, a good rule of thumb is to have all the relevant documents with you. But what documents do you need? Let's categorise it into four parts:

1. Your identification details, such as your IC, income tax reference number, and marriage certificate.

2. Your income statement and details. For instance, the EA form and pension statement. 

3. Relevant receipts and invoices for claim purposes such as rebates, reliefs and exemptions. 

4. Your EPF statement, obtainable via EPF's i-Akaun.

5. If you're using e-Filing, you must have the e-Filing PIN before you can start filing your taxes. You can read more about it here.

E-Filing simplifies your tax filing process, helping you save time and energy.

2. Understand your tax reliefs and deductions

People often think that income tax deduction is the same as income tax relief. There's a small difference. 

Gifts and donations to charities or government organisations is an income tax deduction. An example is donating money to a retirement home.

Income tax relief is when a taxpayer's obligations are either reduced or eliminated. We are entitled to an exemption on our tax returns, but tax reliefs may vary. 

Don't forget, you will need documentation as proof of transaction when submitting, such as receipts and invoices.

Check out these tax reliefs for YA 2020 here.

3. Remember to settle your outstanding balance (if any)

Some people may have missed something when filing their taxes, but you can always pay the LHDN even after you have submitted your taxes. 

For instance, a person has two jobs, and the second job is contract-based. They forgot to declare it when they were filing their taxes. They can still do it by settling outstanding payment via FPX/online banking, the nearest ATM, and the nearest LHDN counter.

If you somehow overpaid your taxes, you will receive a refund. File your taxes earlier, and you will receive the refunds earlier. If you do it via e-Filing, the LHDN will deposit refunds directly into your bank account. Usually, the refunds are credited within 30 days after the income declaration. 

4. Keep all your receipts in one place

Even better, categorise your receipts, so it'll make your tax filing process more manageable. 

Did you know that the Income Tax Act says that you must keep your receipts for at least seven years? If you don't, you could spend a year in prison, fined RM300 to RM10,000 or both. 

As you know, your receipts are proof that you have performed the transaction and qualified for tax relief. When you keep the receipts as proof, it is also a way to show that you may have made an honest mistake and avoid criminal charges. 

The LHDN sometimes does random audit checks to check on the claims' proof, so let's play it safe and keep the receipts for as long as possible. 

Organise all your receipts in one place.

5. Get to know the EA forms

Did you know that there is more than one EA form? You could accidentally fill the wrong EA form that differs from your source of income and residential status. 

Not to mention, these forms also have different deadlines. So here's a list of forms to help you understand which category applies to you:

1. Form e-E (Deadline: 31 March 2021) for employers who run a business/company.

2. Form e-BE/BE (Deadline: 30 April 2021) for those who do not run a business and are employed.

3. Form e-B/B (Deadline: 30 June 2021) for those who own and run a business. 

4. Form e-P (Deadline: 30 June 2021) for partnerships.

5. Form e-M/M (Deadline: 30 June 2021) non-residents who are employed and/or run a business. 

6. Form e-BT/BT (Deadline: 30 June 2021) experts and specialists in certain skills.

7. Form e-MT/MT (Deadline: 30 June 2021) non-resident experts and specialists in certain skills.

Non-resident applies to foreigners without Malaysian citizenship or permanent residence but reside and work in Malaysia. 

The most important thing is that we do not evade taxes. Why? Because tax evasion is an offence punishable with an RM1,000 - RM20,000 fine, on top of an extra 300% of the amount one tried to avoid. 

We hope that you experience no issues when filing your taxes. The sooner we get it done, the better. 

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