The Stress-free Way to Pay Your Taxes
With March 15 just days away, many business owners and self-employed persons in Jamaica are putting things in place to fulfil their annual tax obligations. This is the deadline for these persons to file several tax returns and remit payments to Tax Administration Jamaica (TAJ).
For those who follow proper accounting practices in their business operations, this annual tax time may not bring on too much anxiety. Once business people keep their records up to date with simple bookkeeping systems, giving the Government its due should not be an problem.
However, for the large number of entrepreneurs who fail to utilise basic accounting procedures, tax time will definitely present a major headache. The last thing a business owner needs is the threat of having the tax authorities investigating their operations!
Tax dodgers, beware!
Self-employed persons who have avoided the tax net for years must realise that the Government will be going all-out in its efforts to identify and prosecute tax evaders, in light of the massive budget deficits the country is facing. As we say in Jamaica, their 'free paper' will burn in due time.
What should you do if you are behind on your tax obligations? First, you need to hire an accounting professional who can help you to organise your accounts and prepare the required returns. Then, you need to meet with the relevant compliance officers to create a payment plan for your debt.
While you regularise your tax status over time, you also need to ensure that you remain on target with your current tax payments. Let's look at some of the things that you need to be aware of when paying taxes in Jamaica.
Persons required to file and pay taxes
According to the TAJ, anyone who operates a business or receives income is required under the Income Tax Act to file an income tax return each year. These include employed persons with a side business, self-employed individuals, partnerships and companies.
Individuals who have earned more than $507,312 in 2013 need to file a tax return, unless their only source of income was from employment that was already taxed at source under the Pay As You Earn (PAYE) system, or from interest earnings which had withholding tax previously deducted.
It's important to note that even if you made a loss in your business, the tax authorities still require you to report your earnings. Also, if you have a job, once you earn extra money, for example by teaching extra lessons or renting part of your house, you need to file your returns.
Taxes to be filed and paid
The TAJ requires applicable businesses and individuals to file a Final Income Tax Return for the previous year, and an Estimated Income Tax return indicating the projected income tax for the current year. Estimated taxes should be paid quarterly in March, June, September and December.
Outstanding income tax payments for the year 2013, as well as estimated first-quarter income tax payments for 2014 are due to be remitted on or before March 15, 2014. Other statutory obligations such as NHT, NIS and education tax are also required to be filed and paid during March 2014.
The good news is that self-employed persons can now use a consolidated quarterly form, S03, to pay for their estimated income tax, NIS, NHT and education tax at one time. This removes the need to visit the NHT and NIS offices to take care of these periodic payments.
Paying taxes now easier
Before the implementation of this consolidated tax payment, self-employed persons would have to pay NHT dues and education tax on a monthly basis, while remitting final NIS contributions in March each year. This new system brings a streamlined approach to paying multiple taxes.
Another time-saving initiative by the TAJ is the website, www.jamaicatax-online.gov.jm, which allows taxpayers to file and pay their obligations online. Various charges, such as property taxes, traffic tickets, income taxes, statutory payments and business fees can be paid via the Internet.
You can register to pay taxes directly on the website, where you will receive a username and password. To file your returns, you will need to complete an Application for Electronic Filing Account Registration form at any tax office, after which you will receive an e-mail confirmation.
Self-employed must plan for taxes
One of the financial challenges that many business persons face is that they don't put aside money on a regular basis to pay their tax obligations. It then becomes very difficult to find a lump sum at the end of the year, so many persons end up owing the Government.
With the consolidated S03 payment, it will be easier for the self-employed to plan for paying their taxes. Once the estimated tax payments are known, they can put aside a set amount each month from their earnings to cover all four tax bills when they are due.
I have created an Excel spreadsheet to help self-employed persons determine their quarterly estimated taxes. This calculator also works out how much money should be saved each month in order to pay these obligations. This form can be downloaded at www.financiallysmart.org.
Cherryl is a money coach, business mentor, and founder of Financially S.M.A.R.T. Services. Her upcoming book, "The 3 Ms of Money" will reveal all the secrets she learned about financial success. Get more advice on money and business matters at www.financiallysmartadvice.com and www.entrepreneursinjamaica.com. Email comments to email@example.com.