Dawgen Global: All you need to know about income tax return forms - Business

Sunday, February 3, 2013

All you need to know about income tax return forms - Business - JamaicaObserver.com

All you need to know about income tax return forms - Business - JamaicaObserver.com:

AS persons prepare to file their annual Income Tax Return for 2012 and their Declaration of Estimated Income and Tax Payable for 2013 to meet the March 15 filing due date, it is very important that they use the correct forms and complete them properly.

The form to be used will depend on whether the business or person is self-employed, a company, a partnership, a life assurance company or a pensioner. It is also imperative that all relevant sections of the forms are properly filled out with the correct TRN, name, address, trade name, gross sales, expenses, tax computation, and so on. This will ensure that difficulties will not be encountered in the processing of the returns. The following outlines what forms should be used.

The form to be used will depend on whether the business or person, is for a self-employed, company, partnership, life assurance company or pensioner.

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IT01 - Individuals

Individuals such as self-employed persons, partners and employees/pensioners taxed under the Pay As You Earn (PAYE) system, but who also have other sources of income in addition to their salaries or wages -- such as rent or a business "on the side", MUST file their annual income tax return using a Form IT01.

Remember, persons whose only source of income is from salary and wages, pension, bank interest, dividends and/or other income that is already taxed at source are currently not required to submit an annual income tax return, unless they are directed to do so by the tax authority.

IT02 - Companies

Businesses operating a registered company should complete a Form IT02, to report the income and tax liability. If a director receives income from the company that is not taxed at source on the company's payroll, then the individual will need to file their personal tax return, reflecting income from all sources using the IT01 form.

IT03 - Partnerships, building societies, etc.

All organisations such as partnerships, building societies, trusts or deceased estates and societies registered under the Industrial and Provident Societies Act should use a Form IT03 to file their income tax returns.

Remember, although it is the individual partners that are taxed, a return showing the total income of the partnership is required. In addition, each partner must file an individual return Form IT01 showing their share of the profit/loss in addition to income from other sources.

IT04 - Life assurance companies

Life assurance organisations should complete a Form IT04 in respect of Life Assurance Funds only.

IT05 - Pensioners and PAYE individuals

A Form IT05 is to be completed by a pensioner and any other person taxed under the Pay As You Earn system whose source of income is from salaries or wages, pensions, dividends, bank interest and other income from which tax has been deducted at source, when claiming a refund in excess of their correct liability.

Remember, when submitting a refund claim withholding tax, certificates and/or employees P24 must be attached to verify taxes deducted at source. Please note, however, that if income is also earned from other sources, such as rental or from a business on the "side", the person should not use the IT05, they instead should use the Form IT01.

IT07 - Estimated income tax

Once a business or person is required to file an income tax return using Forms IT01, IT02, IT03 (excluding partnerships) or IT04 they should also complete a declaration of estimated income and tax payable for the current year (2013) using Form IT07. The estimate is based on the income for the previous year. If, however, there are known factors that will affect the current year's earnings either positively or negatively, the estimated return should reflect any adjustment. A brief explanation regarding the adjustment should be attached to the return.

Other information that should be submitted with the tax returns

The completed forms IT01, IT02, IT03, or IT04 are to be accompanied by the person's or business's Financial Statements - Balance Sheet and/or Profit and Loss Account, income tax computation and any other supporting document.

The Income Tax Computation reflects additions to or subtractions from net profit to arrive at the income which is taxable. For example, if a shopkeeper uses some of his stock for personal use, then the value of this is added to the net profit. If he purchased any fixed asset, for example, a freezer, then the portion of the cost being allowed as Capital Allowance would be used to reduce the net profit. (Note that the full cost of assets used in the business is allowed for write-off over a number of years as a Capital Allowance at rates determined by law).

As a self-employed individual, if the gross receipt or income for the business is under or equal to $3 million, then a Schedule 1- Details of Trading may be submitted along with the IT01, instead of preparing Financial Statements.