What you need to know about tax reliefs and income tax

Tax ReliefWhat is tax relief?

Tax Relief is the subtraction of a certain amount for money expended in that assessment year, from the total annual income. These are for definite activities or behaviors that the government encourages or even necessities or burdens to lighten our financial loads.

Tax resolution  can aid in reducing one’s chargeable income, and thus one’s taxes. If planned properly, a significant amount of taxes can be saved.

Who can claim for tax relief?

There are three principal groups of individuals who can claim these tax resolution/rebates. They are:

  •   Single individuals
  •   Married couples with parents
  •   Those with children

 

What can you claim tax relief on?

Your tax resolution can be claimed in various categories, from medical treatment, education fees to insurance.

For insurance relief, you can claim tax resolution on the premiums paid, subject to definite terms and conditions. For pensionable public servants, they are entitled to a restricted $7, 000 tax resolutions for their life insurance premiums. Meanwhile, non-public servants can claim up to $3, 000 for life insurance and $4,000 for EPF.

You can also lay claims on deferred annuity and Private Retirement Schemes (PRS) of up to $3, 000. Insurance premiums for education and medical benefits are also claimable for up to $3, 000.

Several items can be claimed for tax relief under the lifestyle group too:

  •   Books, journals, magazines, printed newspapers
  •   Sports equipment and gym membership fees
  •   Computer (annually)
  •   Payment of a monthly bill for internet subscription
  •   Smart phones

The maximum income tax resolution amount for the lifestyle group is $2, 500.

INCOME TAX

What is an income tax?

Income tax is a yearly tax levied by the government on an individual and business income. Mainly the government will take a small portion of the money you make at your job as a contribution to the country.

Who needs to pay income tax?

As of the year 2015, any individual earning more than $34, 000 annually (or roughly $2, 833.33 per month) after EPF deductions needs to income tax. You are required to pay tax for all types of income, including income from your business or profession, employment, dividends, interest, discounts, rent, royalties, premiums, pensions, annuities, and others.

For salaried employees, this not only includes your monthly salary, but also things like bonuses, overtime, commissions, and all other taxable income. The same is applicable to freelancers as well.

Why do we need to pay income?

Since governments can’t operate without revenue, income taxes are a great source of revenue for governments. The money you pay in taxes goes to many places. In addition to paying the salaries of government workers, your tax Ringgits helps to support civil servants, such as teachers, police, doctors and firefighters.

Tax money helps to ensure the roads you travel on are safe and well maintained. Taxes fund public libraries and parks. Taxes are also used to fund many types of government programs that help the poor and less fortunate, as well as the building of schools and hospitals.

What happens if you don’t pay for income tax?

Paying your taxes is a civic duty. Therefore, tax evaders may face jail time for illegally dodging their responsibility. According to the Income Tax Act of 1967, “Failure (without reasonable excuse) to furnish an Income Tax Return Form” can result in fines of $200 to $2, 000, imprisonment or both.

On the other hand, “Willfully and with intention to evade or aid any other person to evade tax” carries a much more strict penalty with fines of $1, 000 to $20, 000, imprisonment or both, plus 300% of the amount undercharged.

Tax evasion in this context refers to non-payments and underpayment of taxes owed. In addition, an “attempt to leave the country without payment of tax” will also result in fines of $200 to $2, 000, imprisonment or both eventually.

How do I pay my income tax?

For most of us, the compulsory monthly tax deductions set by our employers would have already covered our income tax payments for the year, and filing our taxes means getting an income tax refund from the government.

But, for those who run their own business or have a secondary income, that isn’t always the case. If you have filed your income tax and there is still a deficit to be paid, the Inland Revenue Board (IRB) offers a wide range of methods to pay for your taxes – ensuring there are no excuses for not paying your income tax on time.

Income Tax Relief

Income tax resolution, also known as income tax debt relief, is a legal short-term or long-term solution offered by individuals or state income tax authorities to settle income tax debt. Income tax liability relates to funds owed to the United States state tax agency, such as the Internal Revenue Service (IRS), that comes from current or previous tax returns. The income tax liability may include the income tax owed in connection with accrued interest and penalties.

Short-term solutions for income tax resolution include borrowing from a family member or friend. Carry out a sale of income tax resolution, that is sell valuables for cash or liquidation; or take out a short-term personal loan. If these options are not available, the state tax authority can offer a number of long-term solutions based on income tax resolution laws. In the United States, taxpayers can apply for an offer in compromise (OIC) or an IRS installment payment agreement under the Income Tax Resolution Act. The Tax Relief Act also provides a permanent solution to income tax liability, known as “tax insolvency”

An OIC can make tax resolution available for taxpayers who are not able to fully pay their tax liability or if an installment payment agreement is not an option. A compromise offer is an agreement between the IRS and a taxpayer that settles the taxpayer’s debt. A fee is charged for the submission, but this can be waived in most cases. In the case of an OIC, the IRS can settle the tax liability by deducting less than the full payment if there are doubts about liability, doubts about collectability, if levying the tax would cause economic difficulty or if this were the case unfairly and unfairly.

An IRS installment payment agreement, also known as a payment option, or payment agreement, is an agreement between the IRS and the taxpayer to make payments on taxes owed by the taxpayer. Taxpayers must pay a fee to complete the installment contract, also interest and penalties. Interest and penalties can be minimized if the taxpayer is able to pay the tax without delay or in a few months. Taxpayers whose combined tax, penalty and interest charges are below a certain threshold can use the Internal Revenue Service’s online payment agreement (OPA). In the event of tax insolvency, tax payers must contact a tax attorney to support the process.