Serika Sterling | Defeating the income tax maze
OP-ED CONTRIBUTION: TAX FILING
Last week’s article focussed on the entities and individuals that are required to file an income tax return. Now for a brief overview of the income tax preparation and filing process.
It is in no way exhaustive, but provides a good start. Let's begin with some key terms:
Income tax return: This is the form that you will complete for submission to Tax Administration Jamaica, TAJ. The specific form is based on your business category or structure – limited company, sole trader, partnership, non-profit, etc.
Year of assessment: This refers to a 12-month period commencing on the first day of January in each year or any other 12-month period approved by the Commissioner General of TAJ.
Income tax computation: This is the calculation done by your tax preparer to determine whether you have an income tax liability or a credit/refund.
To kick off the preparation and filing process, start by gathering all financial data for the year of assessment. This includes bank statements, receipts, invoices, prior year tax filings, Form P24 (if also employed), and dividend and interest certificates. Your tax professional should thoroughly examine all these records and use them to prepare your income tax and capital allowance computations.
Your tax professional will provide a complete list of the documents or information required for your specific entity.
Having reviewed all your financial data, your tax professional will apply the relevant provisions of the local Income Tax Act to calculate your ultimate tax payable, if any. Generally, this is done by determining which income is taxable, which expenses are deductible and in what proportion.
In addition, some transactions may be revalued for tax purposes, as in the case of some motor vehicles.
Your financial data along with the income tax and capital allowance computations are used to complete the income tax return forms applicable to your entity.
In addition to your income tax return for the year of assessment, you are required to file an estimated income tax return for the following year. This means, come March 15 you should file an income tax return for 2018 and an estimated income tax return for 2019. Your tax professional can assist you to calculate and complete this form as well.
Submission of documents and forms
Once you have completed the income tax returns, you are required to submit them to TAJ, along with all the required documents, including income tax and capital allowance computations, calculation of Employment Tax Credit, income statement and balance sheet, and P24 Form, if required.
Once again, your tax professional will advise the complete list of documents required in your circumstance.
It is important to note that it is now mandatory for limited companies, charitable organisations, partnerships, trust, estates, and building societies and certain life assurance organizations, to complete their income tax returns online, using the TAJ’s online tax filing portal.
If you have a tax payable, you can make the payment online using a credit card – Keycard, Visa or Mastercard – or by bank transfer from a Bank of Nova Scotia account.
You may also pay at any tax office branch using a cheque, cash, debit or credit card. If you use this option, be sure to take along a copy of the filed income tax return form.
On the other hand, your business or company may have an income tax credit from the prior years or a credit from a different tax type. To apply the tax credit to the current tax payable or to get a cash refund, you are required to make a formal request to TAJ and submit the required documents for processing.
Your tax professional can provide guidance on getting your tax credit or refund processed.
Now that you have completed the process for this year, implement these steps into your business’ overall planning to make for a smoother tax filing process next year.
Analysing financial data, applying local tax laws and understanding the tax administration process can be quite complex and time consuming. If you lack the necessary expertise internally, engage the services of a tax professional.
Serika Sterling is a Certified Public Accountant and owner/manager of Senior Accounting Services.