Tax Administration Jamaica (TAJ) has been very active in informing self-employed persons and business owners about filing tax returns and paying taxes. As the tax deadline date of March 15 approaches, it’s important for these individuals to pay close attention to tax matters relevant to them.

With the stresses of running a business, entrepreneurs may sometimes neglect to follow all the tax requirements, which can be costly if they have to pay penalties and interest from late returns. It is critical for them to seek advice and update themselves on their obligations to the tax authorities.

Self-employed persons, who were formerly employed to an organisation which deducted all their taxes for them, may also be a little uncertain about all the steps required to keep them tax compliant. They, too, have a lot to lose if they fall afoul of the tax administration’s regulations.

If you are self-employed or if you earned money outside of your regular pay cheque during 2014, then you may have to submit some information to Tax Administration Jamaica and pay taxes on your earnings. Let’s take a look at some pertinent tax considerations that will apply to you.

Should you file tax returns?

A tax return is a form supplied by the tax authority on which an individual or company will provide information relating to income and expenses. This form is used to assess the person’s or entity’s liability to pay taxes for a particular period. How do you know if you need to file a tax return?

According to the TAJ, self-employed individuals, employed persons with other income sources (including pensioners), and partners with a share of partnership profits, should file an income tax return for 2014, once their total income was in excess of the tax-free threshold of J$507,312.

Your taxable income includes profit from business activities, farming, rent, interest, and dividends. Even if you make a loss in business, you still need to file a return. If your investment interest had withholding tax already deducted, then you do not need to file a return to declare these earnings.

Combined filing of returns

In the past, self-employed persons were required to submit separate annual returns for income tax and education tax, as well as contributions to the National Housing Trust (NHT) and the National Insurance Scheme (NIS). Thankfully, recent improvements have provided for a consolidated return.

The TAJ introduced the Self-employed Persons Annual Return of Income, Taxes and Contributions – form S04, which allows you to report these four individual declarations on one sheet. Therefore, you are no longer required to visit three agencies to complete your annual filing requirements.

You can also file a consolidated estimated return for 2015 utilising the new S04a form to report your projected income, taxes and statutory contributions for the upcoming year. These annual and estimated returns should be completed and filed on or before March 15, 2015.

If you are an employee with PAYE deductions or a pensioner and you have additional income to declare but you don’t operate a business, then you should file your tax returns on the IT05 form.

Calculating your tax obligations

Filing your annual returns is just one of your obligations for March 15; you also need to ensure that the final amounts for your income tax, education tax, NHT and NIS contributions that have accrued for the previous year are paid. Let’s look at how to work out your requirements for these taxes.

Your income tax liability is calculated by totalling your income sources, then subtracting allowable business expenses, the tax-free threshold, and NIS and approved pension contributions. Twenty-five per cent (25%) of this resultant statutory income should be deducted for income tax.

Five per cent (5%) of your net income should be contributed to the NIS, up to an annual earnings ceiling of $1.5 million; while three per cent (3%) of your net income goes to the NHT. Education tax is two and a quarter per cent (2 1/4%) of assessable earnings.

Meeting your obligations

In addition to making your final annual payments for 2014, you are also required to pay a portion of your taxes and contributions for the first quarter of 2015. Estimated taxes should be paid quarterly in March, June, September and December, utilising the combined S03 form.

Please note that even if you don’t have enough money to pay your taxes and contributions when they are due, you must try to file your returns on time. You can meet with a TAJ compliance officer to make a payment plan for your outstanding tax amounts, which may be subject to interest costs.

The tax return forms and calculations may be a little intimidating for the average taxpayer, so it’s advisable to contact TAJ customer care for guidance at 1-888-tax-help or taxhelp@taj.gov.jm. If you can afford it, you can also hire an accountant to ensure that your calculations are correct.

Paying taxes is definitely not a welcome part of being self-employed or running a business, but it is an obligation that you can’t escape. As the TAJ becomes more adept at seeking out tax evaders, it’s best to stay on the right side of the law and avoid the harsh penalties for non-compliance.

Copyright © 2015 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, March 5, 2015

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Cherryl is a money coach and business mentor, and founder of Financially S.M.A.R.T. Services. See more of her work at www.entrepreneursinjamaica.com and www.financiallysmart.org. Contact Cherryl