You will be able to fix a filing mistake and know when to object to an assessment.
Darren had fixed this year's return. The two years before it still bothered him. In each of them he had earned tuition income that never went on his return, and both had been assessed and paid. His first thought was to leave them alone, since nobody had asked. His second was that the longer he waited, the worse a letter from IRAS would be.
This lesson covers what to do when you find a mistake in a return, how coming forward early changes the outcome, and when to object to an assessment you think is wrong.
It helps to separate two situations, because they're handled differently.
In the first, you made the mistake. You left out income, claimed a relief you didn't qualify for, or entered a wrong figure, and the result is that you paid too little tax. That is what happened to Darren.
In the second, you think IRAS got it wrong. Your notice of assessment shows income you didn't receive, leaves out a relief you claimed, or applies something incorrectly. The result is usually that you've been charged too much. That is when you object.
Both start the same way: write down exactly what's wrong, which year it affects, and what the correct figure should be, with the documents that show it.
If you find the mistake before your notice of assessment has been issued, you can usually update or revise your return through the IRAS portal. IRAS explains how on its website.
If the year has already been assessed, as Darren's had, you tell IRAS about the error. IRAS has a voluntary disclosure programme for exactly this. If you come forward on your own, before IRAS starts asking questions or begins an audit, and you give full details and correct the error, IRAS generally treats you much more leniently than if it finds the problem itself. The conditions, and what "voluntary" and "timely" mean in practice, are set out on the IRAS website.
The difference is large. Penalties for undeclared income found by IRAS can run to several times the tax that was undercharged, and serious cases can go further. A voluntary disclosure made promptly usually means paying the tax owed with a much smaller penalty, or in some cases none.
Darren gathered his records for the two earlier years: his PayNow history showing payments from parents, and the receipts for his worksheets and books. He worked out the net tuition income for each year. In this example it came to about S$5,000 a year. Under the practice table from lesson 1.4, Rebuild your tax bill from scratch, with his chargeable income at about S$33,000 in each year, that adds about S$150 of tax per year. Then he made the disclosure through the IRAS portal, listing each year, the income left out and the expenses against it.
A few weeks later, IRAS issued revised assessments for both years. He paid the extra tax by the due date.
If you think IRAS made the mistake, you can object to the assessment. You do this through the IRAS portal, stating what you think is wrong, what the figure should be and why, with your supporting documents.
There is a time limit for objecting, counted from the date of the notice. IRAS states it on the notice and on its website. Check it the day the notice arrives. If you miss it, your options narrow sharply.
While an objection is under review, the tax on the notice is still due by its due date. Pay it, and if the objection succeeds, IRAS refunds or adjusts what you've paid. Reading the fine print: payslips, statements, policies and contracts, lesson 4.3, Paying, GIRO instalments and objecting if something is wrong, walks through the objection process and payment in detail, and lesson 4.4 of that course traces a notice line by line.
Both routes reward speed. A voluntary disclosure works best before IRAS has contacted you, and an objection only works within its deadline. The worst position is knowing about a problem and waiting.
Keep everything you sent and received: the disclosure or objection, IRAS's replies, the revised notice, and proof of payment. File them with that year's records, which lesson 7.3, Records to keep and the year-end routine, covers.
Darren also changed one habit. His tuition records now go into the same spreadsheet every Saturday evening, so the figure is ready when filing opens and nothing has to be reconstructed from memory.
For the activity, write the steps you would take if you found an undeclared income item from last year, in the order you'd take them.
Write the steps you would take if you found an undeclared income item from last year.
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