Before you begin reciting your New Year’s resolutions to go on a diet, stop smoking and start exercising (yes, we hear it every year!), why not try and make some headway on your taxes instead? It pays to start early and you’ll see why.
The early bird gets the worm and enjoys less stress, or so the saying should go when talking about filing income tax returns.
There’s nothing more exasperating than waiting till the last minute to file your taxes and only then find out that you’re missing an important document or can’t remember your e-Filing password. You can avoid much of the unnecessary and cumbersome stress by simply giving yourself enough time.
We’ve constructed a nice little guide to support your preparations and get your tax chores underway. Check out these motivating tips to help you commence your tax file prep work!
1. Get the Paperwork Together
Now we hope you’ve kept your financial documents organised (and neatly filed) throughout the year, but if you have not, then expect a little more paperwork on your plate. Aren’t you glad you started early? Get a move on with these tasks first:
1) Gather all unfiled tax-related documents (e.g. insurance premium receipts, parents’ medical bills and dividend vouchers), separate them and file accordingly.
2) For receipts or bills that are less inky, do make an electronic copy while still legible to protect your document. Note that, the Income Revenue Board of Malaysia (IRBM) requires that records be maintained for a period of seven years.
3) Request an early release of your EA form (i.e. Employee’s Statement of Remuneration) immediately after your December 2015 salary to estimate your possible tax dues or refunds in advance. You can also do a quick calculation of your own if you have all your payslips. This will give you some idea of what to expect.
3) If you have any business incomes outside of your regular employment, make sure all invoices and expense receipts are accounted for as well.
2. Register and Update Your Tax File ASAP
If you are a complete novice at filing your income tax, you may need a little more time than the average taxpayer and that’s all the more reason to get a head start.
If your income is at a taxable level but for some reason you do not have a tax file, then just register online to open one.
For those already registered, be sure to update personal information like your correspondence address, bank account details and latest contact numbers.
3. Get Professional Help
Consider hiring a bookkeeper or attending a short-course to help you plan and prepare taxes effectively. Even though it might cost you a little extra, learning how to lawfully maximise deductions and reliefs that are specific to your situation could bring significant savings in the long run.
Some folks are instinctively tempted to understate incomes, but a good bookkeeper can help you understand the importance of declaring ALL your income.
Hint: Showing healthy earnings can be a positive influence for loan approvals and depending on your credit status, could even tip the scales for better interest rates.
Nevertheless if you’re a DIY type of person who prefers to handle your taxes independently, then you have some studying to do. Check our previous Income Tax Guide for a guide on calculations as well as LHDN's website for the updated tax rates.
4. Declare Love for e-Filing
Taxes can be really taxing! So here’s a tip to make the whole process a whole lot more ‘chill’, just file online – no travelling, no queuing, and no need to hang out at a government office (unless that’s your thing, then we don’t judge).
What’s more, with e-Filing your information is pre-filled with data from the IRBM’s system, saving you time and effort when compared to the old way of manually writing in paper forms (and rewriting because you’ve made a mistake, yikes!).
Do note that if you notice any clerical inaccuracies on your pre-completed form, do contact IRBM as soon as possible to rectify errors. Once you’re done, you’ll be able to submit your tax forms online and even make payment through internet banking with ByrHASIL .
If you have the time, try these extra tips to cover all your bases: Skim through a copy of your tax form (B or BE, available for download on the IRBM website) to reference and highlight categories relevant to you.
If you know your way around a spread sheet, try to create a simple one to record and sum up related items as listed on your tax return form.
Perform a checklist of the supporting documents that you do have on hand and note to locate other necessary paperwork that are absent.
Why Early Income Tax Prep is Necessary
Two words – Murphy’s. Law. Anything that can go wrong, will go wrong and this is precisely why a head start can never hurt when it comes to something as important as filing your taxes.
In fact, prompt preparation makes it easier to take advantage of tax breaks and as well, influences more ‘well-timed’ financial decisions. Tax planning (even in the last month of the year) can place you in a good position to identify key areas of reliefs and incentives that you may otherwise miss.
Moreover, your initiative could help you save money on late payment penalties, minimise excess tax payments and receive refunds sooner. We’ll leave you with Mark Twain preaching the truth, “The secret of getting ahead is getting started”, and now, it’s not a secret anymore – so go ahead and get started!