(TAX UPDATE) Employer-Borne Personal Tax: A Common Mistakes in Malaysian SMEs (Copy)

(TAX UPDATE) Tax! I Decide How Much To Pay

Introduction

26 Years as Tax Agent. Only 68 Personal Tax Clients. Why?

Many years ago, I was having Bak Kut Teh lunch.

A few SME bosses talking loudly at the next table. Then that restaurant boss said something I still remember until today.

He told his friend, loud and proud :

“I told my outsourced account cum tax girl how much tax I want to pay. She will adjust accordingly.”

That sentence stayed in my head for many years.

Because it explains why, after 26 years in practice, I still do not handle many personal tax cases.

Not because I don’t know how.

Not because personal tax is too small.

It is because many people think personal tax is a Pay-As-You-Suka

In my early days, I saw many sole proprietor and partnership accounts.

Sales invoices not in running order.

Receipt books missing.

Cash sales not fully recorded.

Some cash banked in.

Some cash used to pay suppliers.

Some cash used for personal expenses.

At year end, the account looked like rojak.

Then the taxpayer asked:

“Mr Koh, can settle?”

Another classic case I still remember.

Commission payment. Substantial amount.

Supporting document?

One photocopy of IC. Recipient 18 years old.

If LHDN asks, how to convince?

Then comes the biasa one.

Mixing personal expenses with business expenses.

One bank account for everything.

Business supplier. Petrol. Family dinner. Children’s items. Holiday. Customer entertainment.

Cash sales are another dangerous area.

Some sole proprietors bank in only part of the cash.

Some use cash directly to pay suppliers. Some cash disappears into daily life.

Then the bank statement cannot reconcile.

I also had a friend call me this week.

He asked how to report rental income.

Then he casually told me the rental income was already under-declared for years

Asking me how to clean up self-assessment of stamping of rental agreement.

Another common mistake is owner’s drawings.

A sole proprietor has no salary from his own business.

The business and the owner are the same person.

Money taken by the owner is drawings, not salary.

But many still say: “I pay myself RM5,000 salary every month. Can deduct?”

That is why I am very selective with personal tax work.

Before I issue any engagement letter, I review:

1. Management accounts

2. Prior year tax records and tax audit

3. Accounting records and supporting documents

4. And most importantly, the taxpayer’s attitude

Because sometimes the biggest tax risk is not the number.

It is the mindset.

Some people want tax advice.
Some people want tax magic.
Some people want a magician.

After 26 years, we have only 68 personal tax clients under Mr Koh.

Borang BE: 38 clients

Borang B: 30 clients

Total: 68 clients

Maybe we have the smallest personal tax portfolio in Johor Bahru.

For Borang B tax, the biggest risk is not complicated tax law.

The biggest risk is messy records.

Messy sales.
Messy cash.
Messy drawings.
Messy expenses.
Messy mindset.

PS : Authored by Mr Koh Teck Peng, the group principal, in his personal LinkedIn post

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