Outline Common Errors & Tax Obligations Correct Treatment - - PowerPoint PPT Presentation

Beauty & Industry Beauty & Wellness Industry

Common Errors & Correct Treatment Offences & Penalties Voluntary Disclosure Q & A Tax Obligations Filing of Income Tax Returns Keeping of Proper Records & Accounts Case Study

Outline

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• Tax Obligations

MR TAXMAN

You are considered as a self-employed if you are carrying on a:

Trade Business Profession Vocation

Tax Obligations

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Self-employed can be in form of:

Self-Employed Partner Normal Partnership Limited Partnership Limited Liability Partnership Sole-Proprietor

Tax Obligations

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You need to file your Tax Returns (Form B/P) & make compulsory Medisave contributions

Tax Obligations

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If you are self-employed; and A Singapore citizen or Singapore Permanent resident; and Earn a yearly net trade income of > than $6,000 IRAS will issue a Notice of Computation (NOC) to inform you of your medisave contributions

Who needs to make Medisave Contributions?

Net Trade income refers to your gross trade income less all allowable business expenses, capital allowances & trade losses as determined by IRAS

Tax Obligations

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Do I have to register for GST? You have to register with IRAS as a GST- registered person if:

• Your turnover exceeds $1

million or

• You are expecting your

turnover for the next 12 months to exceed $1 million

Penalties may be imposed for failing to comply with Income Tax/GST Law requirements

Tax Obligations

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Filing of Income Tax Returns

Filing of Income Tax Returns

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So, when will my business income be taxed? Your income will be taxed in the year following the year you earned the income.

Filing of Income Tax Returns

You should decide on your accounting period when you first started your business. Most accounting periods end

• n 31 December each year.

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Report the business income in a summarized 4- line statement in your Form B/P as follows:

• Turnover
• Gross Profit/Loss
• Allowable Business Expenses
• Adjusted Profit/Loss

Filing of Income Tax Returns

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Filing of Income Tax Returns

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Hmmm…..How am I going to keep proper records of all these?!

Keeping of Proper Records & Accounts

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Keeping of Proper Records & Accounts

Business owners are required to keep proper records and accounts of their business transactions for 5 years with effect from 1 Jan 2007 Records need not be forwarded unless called for

• verification. Improper records, merely

approximate amounts, are not acceptable Failure to keep proper record will be subject to a fine not exceeding $1,000 and in default of payment to imprisonment for a term not exceeding 6 months

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Keeping of Proper Records

Hmmm… I wonder what kind of business records do I need to keep?? A record of receipts and payments, or income and expenditure Source documents substantiate entries in your records e.g. Vouchers, invoices, receipts A record of the assets and liabilities of your business, including listings of your business debtors, creditors and cash/bank account balances

Keeping of Proper Records & Accounts

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Keeping of Proper Records

Sources of Income

Courses & Training Provided Customers who sign-up for service packages Walk-in Customers & Product Sales

Keeping of Proper Records & Accounts

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Issue serially printed receipts and retain duplicate if gross income a year exceeds:

• $18,000 from the sale of goods;
• $12,000 from providing services

Do not have to issue serially printed receipts if:

• A cash register is used to record all cash sales
• Invoices are issued for all credit sales OR
• All sales are entered into an accounting

software

Keeping of Proper Records & Accounts

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I don’t have a cash register or accounting software….how?!

Keeping of Proper Records Keeping of Proper Records & Accounts

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Keeping of Proper Records & Accounts

What are the important details that an invoice should contain?

Registration No. 10521924N No.32 Jln Angklong Singapore 121432 Tel No: 61234 123 Fax No: 64561456

INVOICE No. 1012

Date : 01/11/2017 To: Ms Angelina De Cruz 5 Sunset Lane Singapore 123005 Qty Item Description Unit Price Discount Line Total Total Discount Sub - Total GST Total

Business name, Address, Tel

• No. &

Business Reg. No. Description

• f Services,

Goods & Price

* For GST-registered business, you need to issue tax invoices as required by GST legislation

Invoice Date & Number. Customer’s Name & Address Any Discount Offered & Total Price

Name : NRIC : Address : Description of the service : Expiry Date of Package (if any):

• No. of Service

Date of Service Customer’s Signature 1 2 3 4 5 6

For Service Packages, a Customer Record Card should be maintained :

CUSTOMER RECORD CARD (Company’s name)

Customer’s Name, NRIC no., Total Amount Paid & Address Description of Service & Expiry Date of package (if any)

• No. of Services

Entitled & Utilization of Package (such as customer’s signature)

Keeping of Proper Records Keeping of Proper Records & Accounts

As and when customer utilize the service of the package, the fees applicable to the service utilized should be recognized as income and reported for tax Total Amount Paid:

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Business Name, Address, Tel.No. Business Reg No.& Receipt No. Receipt Date Trainees’ Name Course Title / Course dates Total Course Fee Training & Courses Provided

Keeping of Proper Records

Any fees or deposits paid for the course should be recognized as business income

• nce the course commences unless the course is cancelled subsequently and a

full refund is made.

Keeping of Proper Records & Accounts

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Case Study

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Case Study

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Hmm….It’s about time I get my nails done. It’s getting late for my training… better go now. Oh No…I totally forgot it’s my 3rd appointment today!!

Ms Linda A Simpson Miss Aminah Bte Ali Mrs Dorothy Chan

10 Nov 2017

A Frequent Customer of J- Star Nail Art Paid $800 & signed for a course in pedicure with J- Star Nail Art Paid $330 & signed up for a package with J- Star Nail Art in 2016

10 Nov 2017

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Ms Linda had her nails done. She paid $28 and left soon after.

10 Nov 2017

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10 Nov 2017

Miss Aminah attended the training given by a senior staff of J-Star Nail Art

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10 Nov 2017

Mrs Dorothy Chan completed her 3rd session of manicure. She left the place with a smiling face ☺

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Let me see….Linda, Aminah & Dorothy came here today… Linda had her manicure done & paid $28/- Dorothy had her 3rd session of the package completed so far…

10 Nov 2017

Aminah has already paid up in full for the course last month…

The Question is…

How do I record this transaction??

MS JANE

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Name : Mrs Dorothy Chan NRIC : S1234567A Address : 106 Duxton Park #12-345 Singapore 315106 Description of the service : Classic Manicure + Pedicure Total amount paid : $330

• No. of Service

Date of Service Customer’s signature 1 24/09/2017 Dorothy Chan 2 16/10/2017 Dorothy Chan 3 10/11/2017 Dorothy Chan 4 5 6

A customer record card should be maintained

CUSTOMER RECORD CARD (J-Star Nail Art)

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To record $993 in here {(i.e.

$28 + $800) + (330 / 6 x 3) }

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J-Star Nail Art Balance Sheet for the Year Ending 31.12.2017

ASSETS Current Assets Cash Accounts Receivable Inventory Prepaid Expenses Total Current Assets Fixed Assets Land, Buildings Furniture & Fixtures Equipment Total Fixed Assets Total Assets LIABILITIES Current Liabilities Accounts Payable Taxes Payable Accurals Deferred Income Total Current Liabilities Long Term liabilities Mortgages Payable Equipment Total Long Term Liabilities TOTAL LIABILITIES OWNER'S NET WORTH Total Liabilities and Net Worth

To record balance amount of $165 in here

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Personal vs Business Purposes Business Income Deposit into Business Bank Account Retain the Bank Statements

Keeping of Proper Records Keeping of Proper Records & Accounts

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Invoices Received from Suppliers Receipts

• btained

must show details

Keeping of Proper Records

Date

Name of Supplier or Service Provider Description of Goods

• r Services

Amount

Keeping of Proper Records & Accounts

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Purchases Records

Maintain Purchases Record Book To issue payment voucher which shows:

• Full name;
• Identification no.;
• Address of supplier;
• Date & description of

goods or services;

• Acknowledgement of

receipt by the recipient Payment Voucher should be Retained

Keeping of Proper Records Keeping of Proper Records & Accounts

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Keep proper documentation Obtain invoices Common Expenses

Keeping of Proper Records

Staff salary & Employer CPF contribution Rental Administrative expenses

Keeping of Proper Records & Accounts

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Staff Remuneration & Employer’s CPF Contribution

Keeping of Proper Records

Records to keep: Details of employees; Payment vouchers or remuneration schedule; Date & description of services; CPF statements for your claims of employer’s CPF contributions Form IR8A / Return of Employee’s remuneration Log Book for part-time employees

Keeping of Proper Records & Accounts

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Keeping of Proper Records

WAH!....So many bills…how to know which one is deductible for income tax purpose??

Keeping of Proper Records & Accounts

Claiming For Expenses Not to worry…Only expenses that are wholly & exclusively incurred in the production of the income are deductible!

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Allowable Business Expenses

Rental paid for business premises Property tax paid for business Mortgage interest paid for business premises Utilities Telephone charges for business Salary & bonus for employees Compulsory employer’s CPF contribution Capital allowances on fixed assets

Keeping of Proper Records Keeping of Proper Records & Accounts

Some Common Examples

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Disallowable Expenses

Your own salary, bonus & CPF contributions Your own medical fees, income tax & insurance Entertainment expenses for family & friends Food & household expenses Interest on loans obtained for private use Cost of fixed assets purchased Depreciation Maintenance cost of private cars

Keeping of Proper Records Keeping of Proper Records & Accounts

Some Common Examples

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Set up a good filing system for your paperwork from the start of your business Make sure your records can be understood by anyone, not just by you or your accounts staff Obtain the necessary source documents at the time of a transaction Get into the habit of entering transactions regularly to keep your records up to date Enter all transactions accurately into your record books

Keeping of Proper Records & Accounts

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Suggested Templates for Record Keeping

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Mrs Wong - Sole Proprietor of Oceanic Beauty & Spa

Hmm…How do I account and record my business stock? Where do I start? What if the goods get stolen

• r expire?...Can

I claim for it as an expense?? What are the methods to keep track?

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Suggested Templates for Record Keeping

Inventory & Cost of Goods Sold Different Methods used in arriving at Cost of Goods Sold: First-In-First-Out Method (FIFO); Last-In-First-Out Method (LIFO); Weighted Average Method

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Suggested Templates for Record Keeping

Inventory Management Template - Yearly Product Name : Whiteness Face Cream IN OUT Date Description Qty Price per unit Qty Price per unit Units on Hand 01/01/2017 Opening Stock 5 23/01/2017 Purchases 36 $45 41 28/03/2017 Goods Sold 7 $55 34 21/05/2017 Expired units 2 $45 32 18/06/2017 Utilized for business 12 $45 20 10/07/2017 Purchases 24 $48 44 07/08/2017 Goods Sold 9 $58 35 30/09/2017 Utilized for business 8 $45 27 21/10/2017 Utilized for business 3 $45 24 23/10/2017 Utilized for business 3 $48 21 17/11/2017 Goods Sold 11 $58 10 16/12/2017 Purchases 12 $50 22 28/12/2017 Utilized for business 7 $48 15 31/12/2017 Stolen Units (after physical count) 2 $48 13 31/12/2017 Closing Stock 13 Description Qty Price per Unit Amount Inventory at 1 Jan 2017 5 $45 225 Total goods available for sale 72 Refer above 3372 Total 3597 Less:Inventory at 31 Dec 2017 1 $48 48 12 $50 600

• 648

Cost of Goods Sold (FIFO method) (41+23) ($1845+1104) 2949 51

Physical Inventory Count Sheet (Yearly)

Sheet No. Date : Performed by: Inventory No. Item Description Quantity Location Signature:

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$ $ Fees received & sales of product 34,000 Less : Cost of goods sold Opening stock 3,200 Purchases 5,000 Less : Closing stock (2,800) 5,400 Gross Profit 28,600 Less : Allowable Business Expenses Rental Charges 7,800 Advertising & promotion 1,500 Salaries & wages 6,000 15,300 Adjusted Profit 13,300

Statement of Account for the year ended 31.12.2017

Includes Cost

• f Goods Sold
• f $2,949

from Whiteness Face Cream

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Suggested Templates for Record Keeping

Ahhh!!….Am I making mistakes with my accounts?!

Common Errors & Corrective Treatment

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Common Errors & Corrective Treatment

What you should avoid What you need to do and Why

Utilized treatment packages not recognized as sales When the service of the package is utilized, the fees applicable to the service should be recognized as income and reported for tax. Understatement of income Report your gross sales in full Takings that are used to pay for your purchases or expenses must be properly recorded and included in your reported income Claiming expenses based on estimates Claims of expenses against your income must be based on actual amounts incurred for the business, with supporting receipts and invoices. Sketchy records, which are merely estimated amounts, are inadequate and not acceptable for Income Tax purposes

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What you should avoid What you need to do and Why

Making incorrect claims

• f private and domestic

expenses You can only claim expenses incurred for your business Private and domestic expenses are not deductible for Income Tax purposes. (e.g. household expenses, personal insurance, etc) Claiming private motor vehicle expense Claims of motor vehicle expenses including petrol, insurance, repair and maintenance, parking and CBD charges etc. in respect of private-plated cars (E or S-plate cars) are not allowable These expenses will not be deductible even if they were incurred for business purposes

Common Errors & Corrective Treatment

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• 57

Offences & Penalties

There is a general misconception that records do not need to be kept or can be discarded once a Notice of Assessment is received Records should be retained for 5 years whether or not an assessment has been raised The Comptroller may request for these documents in the course of audit or investigation For failure to keep proper records, liable on conviction to a fine not exceeding $1,000 and in default of payment to imprisonment for a term not exceeding 6 months

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If you fail to furnish the Income Tax Return, you may be…

Offences & Penalties

Liable on conviction to a fine not exceeding $1,000 and in default of payment to imprisonment

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Offences & Penalties

If you furnished an incorrect Return … Penalties can amount to as much as two times the tax undercharged, where mistakes have been made through negligence or without reasonable excuse Serious cases of omissions or errors may result in prosecution

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For cases where a taxpayer willfully evades, or assists to evade, liable on conviction to pay a penalty of three times the amount of tax evaded and to pay a fine not exceeding $10,000 or to imprisonment for a term not exceeding 3 years or both fine and imprisonment

Offences & Penalties

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Hmm… Err…excuse me…I like to make a voluntary disclosure…

Voluntary Disclosure

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Voluntary Disclosure

The IRAS Voluntary Disclosure Program aims to help taxpayers ensure their tax matters are in

• rder by encouraging them to

come forward, in a timely manner, to disclose errors or omissions made Moreover, voluntary disclosure

• f past omissions or errors will

attract a much lower penalty!

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Voluntary Disclosure

Penalty Treatment Types of Voluntary Disclosures Waiver of penalty Timely voluntary disclosures made within a grace period of 1 year from statutory filing date Reduced penalty of 5% per annum for Income Tax Voluntary disclosures made after grace period

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Voluntary Disclosure

Co-operation received from taxpayers to correct mistakes made in the past returns Disclosures must be made BEFORE IRAS’ commencement of audit / investigation or letter

• f query relating to his assessment

For cases already under IRAS’s query, audit or investigation, taxpayer’s disclosure must NOT be under the scope of query, audit or investigation

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Mode Contact Information Website https://www.iras.gov.sg/IRASHome/About- Us/Taxes-in-Singapore/Helping-and- Encouraging-Compliance/IRAS--Voluntary- Disclosure-Programme/ Email iit_compliance@iras.gov.sg Ok…So how do I contact IRAS for Voluntary Disclosure?

Voluntary Disclosure

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Assistance for Taxpayers

Service Details Contact Self help (Record keeping guide) https://www.iras.gov.sg/IRASHome/Businesses/S elf-Employed/Learning-the-basics/Keeping- Proper-Records-and-Accounts/ Email Email us via myTax mail for added security https://www.iras.gov.sg/IRASHome/Contact- Us/Email-us/ Income Tax Integrated Phone Service 1800 356 8300 Goods & Services Tax Integrated Phone Service 1800 356 8633 Taxpayer Services Centre 1st Storey, Revenue House 55 Newton Road, Singapore 307987 (Located opposite Novena MRT Station) Operating Hours: 8am to 5pm (Mon to Fri) 8am to 1pm (Sat)

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Tax Obligations File my Income Tax Returns Need to keep proper records & accounts Form B/P Purchases Expenses Banking Sales Errors & Mistakes Improper Records Incorrect Return Considered as an

• ffence

Penalties may be imposed Voluntary Disclosure Reduction in penalty or even waiver

• f penalty

In Summary…

Industry Visits

Do you need someone to take a look at your record-keeping procedure & maybe give you some advise on how to improve on it? Well…not to worry…I have some good news for you! In the next few months, IRAS wishes to pay a visit to your business premises

Industry Visits

To understand your current record keeping methods To facilitate you in filing a correct return To provide feedback & assistance in record keeping We want to help you !!

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