By Hanniz Lam
I remember my Human Resources colleague passing me my EA form to submit my income tax online for the first time many, many, many years ago.
I looked at her blankly and she just said “Senang saja, buat online” (Translated from BM: It’s easy, just do it online)
If you’ve been diligently keeping all your receipts, it’s easy enough but if you haven’t then the nightmare begins.
True to her word, it was easy enough especially when you don’t have many monthly transactions.
First, determine if you are eligible as a taxpayer. According to the Inland Revenue Board (IRB) of Malaysia, also known as Lembaga Hasil Dalam Negeri or LHDN, a Malaysian individual must register a tax file if they earn an annual employment income of RM34,000 (after EPF deduction).
If your annual employment income is above that figure, you will need to do two things: register yourself as a taxpayer to LHDN, and then register for e-Filing, which is LHDN’s online income tax filing platform.
To kickstart the process of registering as a taxpayer, head over to the LHDN’s e-Daftar website, where you can conveniently carry out the process online.
You’ll need to upload a digital copy of your IC to serve as supporting document.
I got it sorted with some muttering and never got in trouble with the Inland Revenue Board Of Malaysia (or Lembaga Hasil Dalam Negeri Malaysia, LHDN.)
In 2008, when I registered my event planning business as a Sole Proprietor with the Companies Commission of Malaysia (or Suruhanjaya Syarikat Malaysia, SSM), and when business started picking up, I didn’t want to waste time figuring out which expenses go where.
I kept the business receipts in a folder, keyed in the monthly income and expenses in an Excel sheet and sent the file and receipts to an accountant and tax agency to handle the paperwork for me.
It costs me less than RM2,000 a year and saves me a lot of time.
Of course, you still need to know the basics of your accounting work or risk getting cheated by your outsourced accountant.
Now, if you’re looking for someone to do your taxes, here’s what to keep in mind.
Start with your network
Personal referrals are very powerful so ask your friends and family for the names of their accountants/tax preparers.
My husband recommended a friend of his. I’ve used their services since 2008 and don’t have much to complain about.
Ask people who are in or familiar with your industry. Gather your list and start contacting them to see if they’re taking on new clients.
Do it as soon as you can because this is a busy time for tax preparers and accountants and they book up fast.
I just received a reminder and checklist from my tax agent to start preparing my documents and get my receipts to them by 30th April or they won’t be able to help me.
Check their certification
Do they have the proper certification to actually do your taxes? You don’t want to hire some fly by night agent to prepare your taxes. (No one wants LHDN knocking on their door.)
One way to check certification is to check the list of legitimate tax agents and information such as the agent’s name, firms/companies, address as well as tax agent’s phone number and validity of approval by the Finance Minister at IRBM’s official portal www.hasil.gov.my.
Check your level of participation
Are you the type to hand over a box of receipts and wait to sign the prepared documents? Or are you expected to fill out your spending on a form and submit it to your accountant?
My accountant expects me to send them an Excel sheet. I like this as it lets me know how my business is doing and how I’m spending my money.
Check their specialization
That will make it easier for both of you when it’s time to do your taxes because you both understand your field.
Check your vibes
Yes, taxes involves very factual numbers but your instinct or gut plays a role when finding the right accountant for you. If you get a bad feeling when you sit down with this person, you have no obligation to stay.
You may want this to be a long-term relationship so you need to feel comfortable.
Check your alignment
It never hurts to have a good relationship with an accountant in case you need to ask a question or two throughout the year.
I’ve asked my accountant several questions about taxes, savings, pension plans or expenses throughout the year. It helps with planning.
What happens if you miss the deadline?
You can still file your income tax, but you may face an interest charge. According to the Inland Revenue Board Of Malaysia (LHDN), failing to pay your taxes on time will incur a 10% increment on your payable tax.
If you forget to file them altogether, there are two scenarios that could happen:
1. The LHDN could choose to have you prosecuted if you fail to furnish your tax returns. In this case, you may incur a fine of RM200 to RM20,000 or face imprisonment of not more than six months (under s.112(1) of the Income Tax Act 1967).
2. You could escape prosecution, but the Director General could make you pay a penalty according to the amount that you would have owed for that year of assessment (this amount does not take into account any tax relief that you would have received).
Filing taxes can be something you hate thinking about, especially when you have a year’s worth of receipts of statements to go through.
There are a few things you can do to make easier:
Create a custom label or folder in your inbox (e.g. Tax 2021). This allows you to label any tax-related documents you get as soon as it hits your inbox.
I share a Google Cloud folder with my accountant. If you’ve got a cloud storage subscription (Google Drive, Apple iCloud, Dropbox, etc.) set up a folder for your taxes. Whenever you get a tax-related document, you could move it to that folder, no matter what device you’re using.
You can also take a photo of your receipts and store the soft copies in the cloud.
If you need to deal with physical documents, create a folder or box to store them. Depending on your needs, this can be as simple as a folder marked with the year.
Know your documents.
Organising your documents won’t help if you don’t know what to organise in the first place. So get acquainted with what kind of income you need to file and what reliefs you are eligible for.
You have two more months to get yourself ready for tax submission. Start this weekend!