Don’t wait until last minute to file tax returns

That time when we are asked as individuals to make our income tax returns to the taxman setting out the income we received in the previous year and the taxes we have paid on this income in discharge of our citizenry duty is here with us again.

An individual’s tax year follows the calendar year running from January 1 to December 31. We are at liberty to earn as much income as we can from as many lawful sources as we can during the year.

Indeed, in these tough economic times, one’s creativity becomes unbounded and much is pursued in the name of expanding your income base.

Some of this income will be subjected to taxation at source through the various tax collection mechanisms e.g. PAYE, withholding tax or instalment taxes. This advance collection of income tax provides much-needed liquidity to the Exchequer in the quest to finance the government budget.

At the end of the year or in any case before the 30th of April of the following year, we look at the total income we have earned in the year and the amount of taxes that we have paid and make good on any shortfall or approach the taxman for a refund. We then make our income tax return by 30th June.

For most, this process is somewhat daunting. For some, the digitisation of the tax return filing via iTax has added to the already complicated tax rules increasing the confusion.

For the tech savvy taxpayers, the tax compliance burden is eased by the availability of online tax return filing and mobile money / online payment of the taxes supported by the readily available wireless networks and data bundles.

For taxpayers earning employment income only, theirs is a charmed path where the iTax platform provides them with a simplified process for filing their income tax returns as the taxes have been fully paid through the PAYE mechanism administered by their employers.

For those working in the freedom economy (freelancers, self-employed, business persons, entrepreneurs etc.) or those earning rental income that has not been declared through the monthly residential rental income taxation regime, the process requires more input.

One would need to disclose both the income earned as well as the expenses incurred in earning the income. This computation is guided by the tax rules on what expenses / costs are allowed for deduction and what do not qualify.

Saved from this quagmire are those business people who are housed by the turnover tax regime, largely vendors and traders earning more than Sh500,000 but less than Sh5 million in revenue in the year, for this lot, they would have complied with the turnover tax of three per cent of their gross receipts.

Much can be said about taxes throughout the year but in June, the resounding words are about complying with the annual obligation to file one’s income tax return.

Desperate taxpayers in a last-minute dash turn to ill-equipped aides in cyber cafes in a bid to beat the filing deadline.

Alas, getting the income tax return in on time is just a fraction of the obligation, getting in an accurate income tax return is critical. Many have rushed to oblige the former only to submit incorrect income tax returns.

Consequently, and with such eloquence, the iTax system communicates to them of the ever-increasing tax demand through defaulter notices to their total dismay.

So, what is one to do? Start the process early, don’t wait for the last minute to file your income tax return, this gives you more time to deal with any issues or obstacles that may arise. And it may even save you some money.