Tax Day is just around the corner, and we all know how we millennials love the last-minute rush . According to a a recent survey on millennials who file taxes, 37% of millennials said they rely on their parents to provide reminders or guidance on tax returns, do their tax returns for them, or let them use their accountant. The survey also revealed American taxpayers are largely in the dark about DIY tax industry pricing practices.Lets all agree that it’s not only in America but also a global issue especially in Africa.
I know most of us think tax is such a complicated boring talk that we never want to engage in. I hope after this tax series your perception will change because am planing to make it very simple,realist and fun.In Kenya,June is basically our tax month and we all rush for tax professionals to get us through it and in the process our taxman’s portal crushes due to traffic.Well,forget the tax rush lets learn how to do it ourselves and in time.
Lets get acquainted to what we shall engage in for the next 4 Wednesdays of the June series on taxes to ;
- How to file tax returns.
- Tax planning for small businesses ,corporates & expatriate tax planning in Kenya.
- Putting the taxman accountable.
- Emerging trends in tax that matter to us.
Be sure to stick around for more .
Without further ado lets dive in.For you to be termed as a taxpayer you must be;
- Of legal age i.e 18 yrs in accordance to the Kenyan law with a National ID to prove .
- Have a source of income.
After having the above,the next easy step is accessing the taxman’s portal where you register and get a PIN number.Why is a PIN number important? It is essential for a good citizen because the PIN number gives you a PIN certificate that is a key requirement for most services.Additionally most corporates will not do business with individuals or companies that do not have a PIN certificate.
If you intend to grow your business beyond the coffee table, then get a PIN number. It is key in good business practice!And that’s not all; if you intend to get a government tender you need to get a valid tax clearance certificate, which you can only get if you have been paying your taxes hence the PIN number. Just a pointer, getting a separate PIN for your business depends on the type of company you have. If it is a sole proprietorship,the business will use your personal PIN:If it is a limited company however, you need to create a new PIN for your business because you are a separate entity from your business.
So how do you get this coveted PIN ? Easy ;
- Go to the iTax website.
- click on the tab, ‘apply for new PIN’.
- Key in your details and it will automatically generate a PIN for you.
So now we are of legal age(18yrs),we have a source of income and a PIN number what next?Getting into good books with the taxman by filling our income and annual returns.But first lets understand some of the terms you will come across in your filling.
One of them is income tax;income tax is tax on any earnings based on your income range. However, if your income is below the taxable income range, which is Sh12,196, your employer should file a nil return on your income. If you are self-employed, you should file a nil return on iTax yourself. So how do you calculate you PAYE before you accuse your employer or taxman of theft?Well its simple just click on this calculator and key in your income that will compute every deduction.I have also attached a screenshot of the calculator just for you,kindly take a look.Be on the know :Ignorance is no defence.
The other term is annual returns;annual return is simply a confirmation to the government that you have earned what your employer has documented. It confirms how much tax was deducted, if at all. The returns you file on iTax are based on your income between January and December of the previous year.
When you file your returns on iTax and click ‘send’ on your form, you will get an automated response on email of the amount of unpaid taxes if any. You are then normally required to pay the arrears in taxes in a month. If your bill is too high you can always go to KRA to negotiate a payment plan with a debt officer.
In the cases where you haven’t made any money as a businessperson or you are student then you do need to file returns as long as you have a KRA PIN and have opened your iTax account.Simply;
- Log on to iTax.
- Click on the file returns tab which gives you an option for “File Nil Returns”
- Simply click File Nil Returns and that’s it.
If you are paying your own taxes then what you will do after submitting your returns on iTax, you will see payment options on what format you prefer to pay in e.g mpesa, cheque or RTGS funds transfer. Once you submit all that information, KRA automatically generates an e-slip notification, and sends it to the email you provided on your iTax form. You have a window to pay by 20th to KRA. That e-slip is what you need to carry with you to your bank of choice to make the payment. If you pay later than the 20th June, you face penalties.
So our 5 How To’s take home of the day are;
- How to generate a PIN number
- How to file returns
- How to file Nil returns
- How to calculate your income tax.
- How to pay your taxes
With these simple DIY I hope we are now out of the dark with the tax industry practices. Remember our taxes run the economy; that is how the government pays its bills and brings development to the people.