What are tax returns?
Tax returns are documentation filed with a tax authority that reports income, expenses, and other relevant financial information.
Taxpayers calculate their tax liability, schedule tax payments, or request refunds for the over-payment of taxes. In most places, it must be filed annually.
Once you have filed your tax return, the ATO processes it. If a discrepancy is found, ATO will give you an official visit. Enhancements in technology and the use of data means ATO is able to take a much broader approach and identify and investigate claims that differ from what is normal across all industries and occupations.
So, if you think you can get away with a few extra deductions or leaving off your side-gig income, think again!
Here is a list of tax return mistakes that can get you into hot water with the ATO.
1. Mismatch income, tax paid or expenses figures
Deliberate or unintentional mismatch or estimation of vital numbers like income, tax paid and expenses can land you into big trouble. In such a scenario, you are likely to get a scrutiny notice.
The ATO has records of this and they compare what you submit against the information they already have. Moreover, they can investigate your accounts, in case they find anything fishy.
2. Fails to gather proofs for tax deduction
Though words are extremely powerful, ATO looks for proof. They could be nabbing big-business tax dodgers who hide all their profits overseas and pay no tax.
As only you hold the track of these deductions, this makes them uncomfortable and thus, they pay extra attention towards them. They look for proofs that can support your claims.
They also have an uncanny knack for asking about items where you can’t find a receipt so it’s best to have that sorted in advance. You must have all the answers of ATO’s queries that too with proofs.
Moreover, it is advisable to not over claim the expenses so as to get more deductions. It is highly recommended to adhere to the strict rules applied to when you can and cannot claim tax deductions for the property related expenses over the year. Just remember not all expenses can be claimed.
3. Not considering tax on overseas income
It is important to understand that even if you are working outside the country, you have to pay tax back home. Don’t assume that you are not eligible to pay tax. This will get you into big trouble and can result in big tax payments.
You must pay taxes on :
1. Pensions
2. Employment income
3. Investment income
4. Business income
5. Capital gains on overseas assets
In case you feel trouble in paying tax back home being in a different country, hire a tax agent to rescue you from this situation. An agent will ease the process for you and will guide you at every step. Just don’t leave it to chance and don’t self-prepare a tax return unless you really know what you’re doing.
4. No receipts to support your claims
Paying money for work-related items and keeping no receipt is a costly mistake that you must resist. As without receipts for your expenses, you can only claim up to a maximum of $300 worth of work related expenses.
You must possess all the receipts of the purchases on which you are looking for tax deductions.
Summary
Tax returns are no cake walk, they are rather a monumental challenge that you just can’t overlook. Thus, it is advisable to hire a skilled tax agent to help you in this pursuit.
An expert will ensure minimal to zero errors which is a must as any minor mistake can cost you huge. So, hire an agent to keep you away from ATO’s attention.
Well-managed accounting and taxation are integral components of a smooth-running business and accurate personal tax matters.
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