Facts about Income Tax

Sunday, January 20, 2013

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Once again it is "Tax Season" and persons should be preparing to submit their income tax returns, due March 15. During this period persons frequently ask questions about who, what, where, when and why should they file and pay income tax? Here are a few facts about income tax.


Who Must File and Pay Income Tax?


Anyone who operates a business or receives income which has NOT been taxed at source is required under the Income Tax Act to file an Income Tax return each year. This includes:


o Self-Employed persons (including partners)


o Employed persons with other sources of income


o Companies


o Partnerships and Other Bodies, such as trusts and estates


In respect of individuals:


o Every individual should file a tax return. However, if the person only receives income from employment and/or bank interest and the income was already taxed at source by an employer under the Pay As You Earn (P.A.Y.E.) system and/or by the bank under the withholding tax system then there is no need to file a tax return. The exception would be if the Commissioner General requests that the person does so.


o If the individual is employed but also has a business on the "side", he/she is required to file a tax return. This applies to persons such as:


o Teachers who receive money for extra lessons;


o Government Doctors who also have a private practice;


o Architects, surveyors, etc., employed by a firm, but who also provide their services independently;


o Lawyers employed in the public or private sector who also provide their services independently for a fee;


o Employees who rent out all/part of their house(s);


o Employees who do hairdressing, dress making, etc. for a fee;


The total income, including the salary or wages, is to be reported and a credit will be given for the tax already paid under the PAYE system.


What Is To Be Filed And Paid?


All categories of persons must file an Income Tax Final Return for last year (2012) and also file an Estimated Income Tax Return indicating the estimated or projected income and the tax payable for the current year (2013).


It should be noted that different categories of persons should use a different Income Tax Return form and persons must ensure that they use the correct form. For example, a self-employed person or an employed person with other income would use Form IT01, while a company would use a Form IT02. All categories of persons would use a Form IT07 to declare their estimated income and tax payable.


Where Are Returns To Be Filed And Payments Made?


The relevant income tax returns and applicable payments are to be made:


1. On-line: at www.jamaicatax-online.gov.jm. To use the online option to file, persons must first be registered to use the Jamaica Tax Portal. This may be done through the Customer Care Centre at 1-888-TAX-HELP (829-4357) or at a tax office. Online payments can be made using a credit card or persons may use Direct Bank Transfer in relation to larger sums; or


2. In-line: at any of the 29 Tax Offices located across the island. At the tax offices, persons may use cash, credit card, debit card or cheque to pay. Where persons are paying by cheque or filing a "nil" return (i.e. no tax payment due), they may use the manual drop box facility in any tax office or electronic drop boxes located in the larger offices.


When Are Income Returns And Payments Due?


Income tax returns, both the annual and estimated, MUST be filed by March 15. While the final payment for 2012 and the first quarterly instalment for 2013 should be made by March 15, the other quarterly instalments for 2013 are to be paid by June 15, September 15, and December 15.


Why Is It Necessary To File And Pay Income Tax?


It is important to file and pay income tax as sanctions can be brought against persons failing to file and pay:


o The Tax Administration Jamaica (TAJ) is authorised to issue an estimated assessment which may also include a penalty.


o An estimated assessment may also be automatically generated from TAJ's computer system, using available information about the person or a similar type and size business.


o TAJ may issue a Court Summons for the outstanding return(s). The Court may impose a fine of up to $10,000 for each outstanding return, plus any outstanding tax assessed would still be owed.


On a more personal basis, being tax compliant is also important, especially to importers and persons trying to get a Government contract, as without a Tax Compliance Certificate (TCC), they would not be able to clear imported goods or to get a Government contract.


Also, apart from the legal obligation, it is everyone's civic responsibility to pay their fair share - no more, no less. This helps to provide funds for schools, hospitals, national security, roads works, infrastructure, welfare programmes, and other government funded programmes and services.


The Talking Tax column is prepared by the Communications Unit of Tax Administration Jamaica (TAJ) to guide the public on their rights and obligations. To get additional information on this or any other tax matter, persons may contact 1-888-TAX-HELP (829-4357) or www.jamaicatax.gov.jm.


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