Monday, April 14, 2008

Penalties for late or wrong tax filing

You have 1 more day to submit your tax returns. Our tax rate this year is as follows:

First $20,000 - 0% - $0
Next $10,000 - 3.5% - $350
First $30,000 - xx - $350
Next $10,000 - 5.5% - $550
First $40,000 - xx - $900
Next $40,000 - 8.5% - $3,400
First $80,000 - xx - $4,300
Next $80,000 - 14% - $11,200
First $160,000 - xx - $15,500
Next $160,000 - 17% - $27,200
First $320,000 - xx - $42,700
Next $320,000 - 20% - xxxx

Our tax rate was actually reduced over the years. So what will your penalty be if you fail to file your tax on time or you negligently file a wrong return?

Offence for Late or no filing
1) A Letter of Composition will be issued. To settle the Letter of Composition, the Income Tax Return must be filed and composition fee paid by the due date as stated in the letter.
2) If IRAS do not receive the Income Tax Return and the composition fee by the due date, a summons will be issued to attend Court. To settle the Summons, the Income Tax Return must be filed and composition fee paid before the date fixed by the Court.
3) If the summons is not settled with IRAS before the date fixed by the Court, you have to attend Court on the assigned date. Once the taxpayor plead guilty, he have to pay a fine subject to a maximum of $1,000 for each summons issued.
4) If the taxpayor ignored everything, a warrant of arrest may be issued and force him to submit and pay the fines
5) A taxpayer who does not file his/her Income Tax Return for any Year of Assessment (YA) for two years or more after the filing due date is liable -
a) penalty equal to double the amount of tax that the Comptroller may, to the best of his judgement, assess to be payable by the taxpayer for that YA;
b) a fine not exceeding $1,000.
c) If the taxpayer cannot pay the penalty or fine to court, he will be liable to imprisonment for a term not exceeding 6 months

Offence for wrong filing of Income Tax
1) A person who files a wrong return due to negligence or without reasonable excuse can be brought to court. If convicted, the person may pay a penalty up to two times the amount of tax undercharged. A fine or an imprisonment will also be imposed.
2) If a person is found to be evading tax, he can pay a penalty up to 3-4 times of the tax undercharged.
3) A fine or an imprisonment will also be imposed.

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