INTERNAL REVENUE SERVICE ANNUAL RETURNS
Statutory filing of returns is provisioned for in sections of 41 (1)-(4) and 81 (1)-(3) of the Personal Income Act (PITAM) as Amended in 2011.
Scenario 1:
- An individual in employment (with no other source of income): section 81 (1) – (3) of PITAM:
Section 81 (2) states ‘Every employer shall be required to file a return with the relevant tax authority of all emoluments paid to the employees, not later than 31 January of every in respect of all employees in its employment in the preceding year’
Section 81 (3) states ‘Any employer who contravenes the provisions of this section shall be liable on conviction to a penalty of N500,000.00, in the case of a body corporate, and N50,000.00 in the case of an individual’
The individual specified in subsection 3 refers to unincorporated bodies (entities with business name registered by CAC or other government MDAs). From the wordings of the section and subsections, it is unambiguously clear employers are the ones to file returns on behalf their employees.
Scenario 2:
- An individual in self employment (does business and earns income): section 41 (1) – (4) of PITAM
Section 41 (1) states ‘ For each year of assessment, a taxable person shall, without notice or demand therefore, file a return of income in the prescribed form and containing the prescribed information with the tax authority of the State in which the taxable person is deemed to be resident together with a true and correct statement in writing:
a. the amount of income from every source of the year preceding the year of assessment computed in accordance with the provisions of this Act and rules or regulations made thereunder; and
b. such particulars as by the return may be required for the purpose of this Act and rules or regulations made thereunder with respect to any such income, allowance, relief, deduction or otherwise as may be material for that purpose’
The ambiguity here is that the law does not define taxable person here, but it can be interpreted to include persons in employment. If it is taken on the face of it, it will contradict section 81 (2) and this is the reason why the States Board of Internal Revenue do not request for returns from employees in paid employment only. That is, they only send such demand for returns with accompanying forms to directors of company and NGOs, proprietors of the business enterprises/ ventures, etc.
Subsection 3 states ‘a taxable person shall file with the relevant tax authority the returns so stipulated in this section with 90 days from the commencement of every year of assessment.
Returns for 2020 year of assessment will become late after 30 March 2020. Though it is an offence not to file on due, however, the Act does not stipulate penalty. In practice, the internal revenue services push for compliance by threatening to raise best of judgment assessments.
Scenario 3:
- An individual in both employment and earns income from part time business
It is important to stress here that all incomes such as salaries, wages, allowances, bonuses, gains from employment including compensations, premiums, benefits, perquisites and gain or profit from any trade, business, profession or vocation, etc. are taxable. The question is under which sections of PITAM 2011 should an individual with sources of income from employment and trade file his/ her returns. From experience in practice and the wordings of section 41 (1) of PITAM, this section will be the legal authority.
Such returns as mentioned can be filed manually and electronically in some States Board of Internal Revenue.
Francis Chavwuko Okoro, FCA
Principal Partner,
F.C. Okoro & Co.
(Chartered Accountants)
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