Self-employed persons: tax planning and compliance could improve your wealth
Nahdoondoo Oakley, GUEST COLUMNIST
March 15 is now behind us, and hopefully self-employed persons were able to meet the income-tax filing deadline to avoid the unnecessary penalties and interest that could impact negatively on their overall wealth.
For those persons who were unable to meet this deadline, we urge you to do so as soon as possible in order to mitigate further interest charges.
With all the talk of recession and restricted government funding, self-employed individuals should ensure that they find legitimate ways to reduce their personal income-tax obligation and protect their future income.
While each citizen should pay their fair share of taxes, everyone has the right to legally minimise their tax liability; when turbulent economic times are being forecast, business decisions must be carefully made so that maximum benefit results from these decisions.
If self employed persons do not take a proactive approach to their-tax liabilities, they risk reducing future income.
As a self-employed individual, you can legitimately reduce your tax liability by structuring your investments to yield maximum benefits.
There are various types of investments available that provide investors with tax advantages. While this may not affect your position for March 15, this is the time to prepare yourself for next year and the future.
Failure to evaluate your investment decisions from a tax standpoint could result in less-than-optimum cash flows and an excessive tax liability. Therefore, tax planning should be incorporated into your investment strategy.
BUSINESS STRATEGY REVIEW
As a business person, you may be missing out on refunds and legitimate tax benefits to which you are entitled.
Working closely with your tax adviser, who would be knowledgeable of the various tax provisions, could result in you identifying legitimate tax refunds and unutilised credits.
Your current strategy may not be the most tax-efficient business strategy, based on current economic projections. There are certainly other factors that determine a chosen business strategy, but have you fully evaluated the tax implications of your chosen strategy? It may be worthwhile to conduct a detailed tax analysis of your entire operations.
PROTECTION THROUGH COMPLIANCE
At a time when resources are limited and the Government is seeking to increase revenue, it is likely that the Government will be turning to taxpayers to reduce the deficit that exists. The Government could likely do this from two strategies, that is, by ensuring that current taxpayers are accurately reporting their tax position, and via the aggressive pursuit of tax evasion.
In recent times, we have seen the revenue authorities taking various measures to pursue delinquent taxpayers, including the seizure of assets.
Business operators should be aware that the revenue authorities also have the power to take court action against you and, if convicted, you may be ordered to serve prison time and/or pay fines or penalties, in addition to settling the tax liability.
Therefore, if you are a delinquent taxpayer, you should not wait for the revenue authorities to find you, instead, assess your situation, consult with a tax adviser and take the necessary steps to regularise your tax position.
In addition, Tax Administration Jamaica currently has a payment facility in place for taxpayers whose accounts are in arrears, effective up to March 31, 2012.
This facility allows delinquent taxpayers to visit specific offices and propose a payment plan to settle any principal tax liability outstanding.
Upon making this arrangement and adhering to it, the terms of settling any penalty and interest on account may be negotiated. It should be noted that for the arrangement to be effected, you must make a deposit on your account.
This is an opportunity to get your tax filing in order as it is likely, upon expiry of this facility, that the revenue authorities will seek to use the full force of the law to catch delinquent taxpayers. In this way, you can protect your investments and your reputation.
The burden of ensuring that you are adequately informed and fully knowledgeable of the various tax laws rests with you.
Remember, ignorance of the law is not an excuse.
Nahdoondoo Oakley is a Tax Associate at KPMG in Kingston.firstname.lastname@example.org@gleanerjm.com