Income tax and Self Assessment

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Question 1

Self assessment meant in the definition of taxation , which is a tax collection in which a taxpayer is responsible for the accuracy in computing and reporting his or her tax liability to the revenue collection agency .Self assessment give greater control and responsibility over tax affairs . It is applies to self-employed people which means people that carrying their business by their own business . Or people that receiving income from the sources where the tax can't be collected under the system.

Under self assessment for individuals , it is based on the concept " Pay , Self-Assesses and File " . Taxpayers are responsible to assess and pay their taxes to government . It should be carried out voluntary by everyone that is liable to tax . Basically there are 4 steps needed to be followed which is payment of tax , completing the income tax form , calculate tax payable and the last step would be submitting income tax form .

Step 1 Payment of tax

Monthly tax deduction will be made by employers for remittance to IRB for employment income . The deductions are used towards settlement of tax on the current year's income .

Whereas for individuals that is earning business income , installment payment must be made based on the notice of installment payment issued by Director General of Inland Revenue (DGIR)

Step 2 : Completing the income tax form

Income tax form will be issued to those individuals who registered with IRB and individuals must ensure that the form is properly completed and signed .

Step 3 : Calculating Tax Payable

It is required for individuals to compute their own tax payable in accordance with the provisions of the law . Whereas assistance and guidance will be provided at all tax offices .

Step 4 : Submitting income tax form

Individuals are required to submit the income tax form for year of assessment stating income and tax payable to IRB by 30th April of the following year . Taxpayers are required to remit the difference to IRB by 30th April of the following year if the total of the monthly tax deductions or installment payment is less than actual tax computed .

A new income tax form will be provided to individuals to compute their tax . In the case of separate assessment for husband and wife , the income tax form will be distributed separately and each will be required to compute their own income tax and be responsible on it as well. It is important for individuals to understand the steps involved in computing the tax payable.

It is also important for individuals to keep their proper record on the tax computation , there are employment income , business income and also the original receipts to all claims made . Furthermore , types of reliefs and rebates that individuals entitled to claim also need to be remembered and also the tax rate . (Self Assessement System)

Under self assessment of companies , companies are required to furnish the estimation of tax , make installment payment , determine the tax payable , and file the Return Form C to Inland Revenue Board (IRB) . An estimate of tax payable must be furnished in a prescribed form in not late than 30 days before the beginning of the period for year of assessment . Whereby for a new company , the estimate of tax payable must be furnished within 3 months from the date of commencement of the operation of the companies . For the basis of estimate , the estimate of tax payable for a year of the assessment should not be less than the revised estimate of tax to be paid for immediate preceding year of assessment . Method that used by companies for the payment of tax is by installment . It must be paid in equal month installment from the second month in the basis period . But for a new company , it must be commenced from the sixth months in the basis period and these month installment must be paid on or before 10th day of each month. If a company failed to pay it fully for the installment payment , 10% of increment of tax will be imposed for the payment outstanding . Companies can pay through Remittance Slip , IRB Payment Counter , By Post or Bumiputra-Commerce Bank Bhd or Public Bank Bhd or Public Finance Bhd . (Self Assessment System)

Responsibilities that lie on taxpayers is to pay the right amount of taxes that they owe . Taxpayers are responsible to report and calculating the total income and count it correctly for the amount of tax due. Under the self assessment system , taxpayers are required and responsible on filling in their income tax and benefit return by deadline and it is normally will be on 30th April of the year of assessment and also paying the right amount of taxes . Furthermore , give the respective agency necessary information to assess the return and issue correct benefits . Taxpayer should take initiative acknowledgement of not only the new tax regime but also the tax legislation that is relating to their personal taxation . Taxpayer can avoid mistakes that might can be costly to them if they having the knowledge about tax . Various relief and deductions will helped taxpayers to minimizes the tax liability . IRB has outlined the responsibilities of a taxpayers in below :

i) To inform IRB regarding the taxpayer liability to tax

ii)To declare actual income received from all sources

iii)To furnish all information requested

iv)To obtain refund from latest by 14 April every year . If the taxpayer has not received one

v)To complete and submit the Return form by 30th April

vi)To compute the tax liability based on tax laws and procedures

vii)To keep record or documents pertaining to income and expenditure for a period of 7 years after submissions of the Return form.

viii)To inform IRB regarding any change of address within 3 months

xi) To pay taxes due when submitting the tax return form

According to him, taxpayers perceptions towards the existing assessment system (formal assessment system) and self-assessment system are important elements for policy makers. A newly introduced system can only work smoothly when the taxpayers have a positive perception towards the system. (Mustafa, 1998)

In addition, give your opinion why government implements this system.

Bardai (Azali, April 2006)asserts that taxation is a universal knowledge that is required by each citizen with potential liability of paying tax. Both government and taxpayers can save lot of time in order to do the tax computation . Government implemented this self assessment system , it is because this system can be increase the level of the income to government , produce a more efficient system and have a faster collection of tax . So that taxpayers do not have to queue up just to pay their tax and this will causes time consuming . Furthermore , by implementing this kind of system , it can also modernizing the tax administration . (Azali, April 2006) (ASSOCIATION, 2003)

Reference

ASSOCIATION, T. C. (2003). TWENTY FOURTH ANNUAL TECHNICAL CONFERENCE . Self Assessment of Income Tax, 18.

Azali, N. M. (April 2006). Self-Assessment Tax System: Survey Evidence from the. UiTM. Retrieved from http://eprints.uitm.edu.my/3551/1/NORAZAH_MD_AZALI_06_24.pdf

Mustafa, H. M. (1998). The Malaysian Accountant. Self-assessment system : Some lessons for the Malaysian individual, 2-7.

Self Assessement System. (n.d.). Retrieved from A Guide for Individual: http://alanyoonassociates.com/self/pdfs/self-assess-indiv.pdf

Self Assessment System. (n.d.). Retrieved from A Guide for Companies: http://alanyoonassociates.com/self/pdfs/selfassess-companies.pdf

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