Remember that when you are using a tax calculator, the results that you receive will only be as accurate as the information that you input in the calculator so it is important to be as accurate as you possibly can. Avoid estimating as much as possible. Some information that you may need when using the tax calculator include your wages for the prior year as well as your filing status. This year you will also need to know how much money you received through the economic stimulus rebate as well when you are using the tax calculator to determine how much you will owe in taxes or how much of a refund may be due to you. If you do not know how much money you received through the economic stimulus rebate, you can check with the IRS at their website to get a quick answer. You will need to enter your filing status, your Social Security number and the number of exemptions from your last income tax return.

Besides determining how much money you may owe or be due, a tax calculator can also help you in a variety of other ways as well. For example, if you are self-employed then you can use a tax calculator to determine how much money you may owe in self-employment taxes. This can be critical to a new business owner who may not be certain what they should expect in self-employment taxes during the first year of doing business. In order to use this type of tax calculator you will need to input the income amounts for your business, so make sure that you have this handy.

Remember that a tax calculator is a great tool to use to give you an idea of how much money you may owe either as an individual or as a business, but you will still need to file your taxes and enter the information accurately.

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There are often several fairly big tax deductions that many taxpayers miss altogether which could save them money on their taxes.

One of the biggest is related to charity. Remember that even if you did not make a cash contribution to charity, you can still take non-cash tax deductions if you donated clothing, furniture, etc. Remember that you should have a receipt to prove the contribution in the event that you are audited.

You may also be able to deduct your medical expenses under certain circumstances. Your medical expenses must total more than 7.5% of your adjusted gross income before you are able to receive any tax benefit from them. If you are self-employed; however, you can deduct 100% of your health insurance premiums regardless of whether they amount to 7.5% of your AGI. In fact, you do not even have to itemize to take that tax deduction.

There are also other tax deductions that you may be able to take as well. If you have higher education expenses and if your adjusted gross income is $65,000 or less as an individual or $130,000 on a joint return then you may be able to take tax deductions for as much as $4,000 of higher-education expenses.

Other possible tax deductions are related to casualty losses. During 2008 there were numerous range and forest fires as well as Hurricane Ike, which struck Louisiana and Texas. If your area was declared as a disaster area by the president then you can claim the loss on your tax return.

Finally, if you own a home make sure you do not overlook the ability to take a deduction on the interest on your mortgage. Your mortgage company should have sent you a statement detailing the amount paid in interest for the previous year.

Making sure that you do not overlook any possible tax deductions is an important way to keep your tax bill as low as possible as well as to help you possibly get a refund on your taxes which may be due to you.

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Some Common Filing Mistakes
1. Declare all income. Winnings from Toto and 4D are not considered income as they are windfalls. I wonder whether this is true or not, but apparently for those who want to cheat on income tax buy winning tickets from people to claim the winnings, and then pay them the winnings, just so that the money becomes legitimate. When I bought oil and gas investments recently, I was asked to declare the money I was using to be free from money laundering. It seems that not just illegal businesses need to do money laundering. Tax evaders have to do that as well.
2. If you are a sole proprietor, it is better that you engage a professional accountant to do your taxes. For hawkers, you can refer to guides in 4 official languages. Remember they come down hard on tax evasion hawkers. Business income is taxable on the sole-proprietor’s name.
3. For rental of homes, do check out what you need to pay. An annual exemption of up to $150,000 is allowed to the NAV of one property, which is occupied by the owner. Any excess above $150,000 is taxable.
4. Royalties are taxable but if yours stem from A local publisher; or A branch in Singapore of a foreign publisher, you will only be taxed on 10% of the gross royalties received if they are received for any literary, dramatic, musical or artistic work.
5. If you are a Singaporean citizen or PR, your dividends from local shares need not be filed because the companies will automatically declare for you, unless you are joint account holders. 

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1. Tax Cheats Are Thrill Seekers
They tend to be energetic and impulsive. They love to take risks. I guess people take the kick out of being able to get with something.

2. In Business
He tends to be in investment banking and entrepreneurship. That explains the curry puff hawker, since he runs a sizeable business.

3. Men Tend To Cheat More
Overall, men tend to lie on their tax returns, while women are less likely to cheat because they know the penalties if they are caught. In addition, some men declare the taxes for their wives, so the wives do not handle the taxes. A larger proportion of women stay at home without income compared to men.

4. Educated Women Tend to Cheat More
While women form a smaller percentage, those with degrees tend to cheat more. It could be that with better knowledge, they earn more and hence are more likely to try to reduce their amount of tax payment. Those with lower education may earn less, and hence there is no need to cheat. Or is it due to different values?

5. Self-employed
Self-employed people tend to cheat more, because they are the ones who declare their taxes. Employees have their taxes declared by their employers, hence there are fewer opportunities to cheat. And because of this, they get audited by IRAS more often.

6. High Fliers and The Wealthy
The ones who earn the most have to pay the most. In some countries, they can pay up to 50%. Hence, there is greater incentive to try to reduce the taxes to get away with the exorbitant taxes. You hear about some famous sportspeople moving away to tax havens just to keep more of their money. Again, they get checked more often by IRAS.

7. Show Me The Finger
People who love to show their middle finger or gesticulate rudely while driving are likely to cheat. It’s because they feel offended by other people and society at large, and resort to getting even through such ways. 

Do you fall into any of the above categories? Adapted from an interesting article about the profile of a tax cheat in Psychology Today.

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It is important to declare earnings properly and do not think that you can get away with tax evasion. The IRAS can dig up information from eons ago and usually the fine is very hefty. Many hawkers are currently being investigated.

My grandparents used to own a chicken farm and I think they under declared their earnings, so when my grandparents went to buy landed property, they were found out by the IRAS, so they were fined heavily.

If you are self-employed, do keep proper records. There are ways to minimise taxes, but they are done legally. You can put your money in SRS or donate to charities.

Sarah Tan – SingaporeProfit.com

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