What is Retroactive Tax? Follow These Steps If You Don’t Want to Face It
As many people say, "Taxes spare no one." If you file incorrectly, file late, or fail to file, you might face retroactive tax without realizing it! In addition to penalties and interest charged retroactively, there may also be legal consequences. If you don’t want this problem to happen to you, let's look at prevention methods and solutions if you are audited retroactively. It’s always better to be prepared!
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What is retroactive tax?
Retroactive tax is the tax collected by the Revenue Department from taxpayers who fail to file their taxes or file them incompletely as required by law. This may result from filing errors or failing to file taxes in previous years up to the present, leading to retroactive tax payments along with penalties and interest.
Who is at risk of retroactive tax?
- Freelancers or business owners with irregular income
- Those who file taxes incorrectly or incompletely
- Those who unknowingly fail to file taxes in certain years
- Individuals with multiple sources of income who do not fully declare them
If you don’t want to risk retroactive tax, you must file your taxes correctly and on time.
Follow these steps if you don’t want to face retroactive tax!
Retroactive tax is something many people want to avoid because, in addition to having to pay unpaid taxes, there are also penalties and interest charges! But how can you avoid retroactive tax? Here are some simple preventive measures you can take:
1. File your taxes on time
Filing your taxes on time is the most important step. If you file late, you will be fined immediately and risk a retroactive tax audit! Ensure that you complete your tax filing before the deadline each year to avoid additional costs.
2. ensure accuracy and completeness of Your Tax Information
Filing errors can lead to refiling or retroactive tax assessments. Double-check your income, expenses, and all documents to prevent mistakes.
3. Report all sources of income
Sometimes, failing to report income from various sources, such as online sales, freelance work, or commissions, may lead the Revenue Department to detect undeclared income and impose retroactive tax. Ensure that you report all sources of income completely.
4. Utilize tax deductions correctly
If you are eligible for tax deductions, such as having life insurance premiums, health insurance premiums, or deductible donations, use these deductions correctly and ensure you have supporting documents for verification.
5. Keep tax records for at least 5 years
Maintaining complete and organized tax documents, such as receipts, bank statements, and income-related records, helps you verify past filings and avoid retroactive tax assessments due to errors.
6. Consult a tax expert
If you are unsure about your tax filing or what should be reported, consult a tax expert or seek guidance from the Revenue Department to ensure compliance with tax laws.
What to do if you are charged retroactive tax
If the Revenue Department charges you retroactive tax, do not panic! Prepare yourself and follow these steps when dealing with a retroactive tax assessment.
1. Review the details carefully
When you receive a retroactive tax assessment from the Revenue Department, check the documents or invoices thoroughly to understand the amount owed and the reason for the retroactive tax charge. If you have any doubts, you can request clarification from a Revenue Department officer.
2. If there are calculation errors or incorrect information
If you find that the Revenue Department’s calculations or referenced information contain errors, such as incorrect income figures or miscalculated deductions, you can submit a request for data correction or recalculation.
3. Pay outstanding taxes as required
If, after reviewing, you find that there are no errors and you are indeed required to pay retroactive tax, you should settle the outstanding tax amount as specified to avoid additional penalties and interest charges. If you are unable to make a lump-sum payment, you can request an instalment plan from the Revenue Department.
4. Request a reduction in penalties and interest
In some cases, you may be able to request the Revenue Department to consider reducing penalties and interest. This depends on the reason for the tax filing error or delay. If your late filing was due to a lack of knowledge or if you have a reasonable and justifiable cause, you may be granted a reduction in penalties or interest.
5. Learn from mistakes
After resolving retroactive tax issues, you should take this opportunity to learn how to file taxes correctly in the future, such as filing on time, verifying accuracy, and properly utilizing tax deduction. This will help you avoid retroactive tax problems in the future.
6. Seek advice from experts
You can consult a tax expert or a specialized lawyer to receive accurate guidance and ensure a smooth resolution of retroactive tax matters.
What are the penalties for incorrect, late, or unfiled tax returns?
Many people see taxes as something distant or may forget about them unintentionally. However, did you know that filing incorrectly, filing late, or failing to file, whether intentionally or not, can lead to unexpected penalties, interest charges, and legal consequences? To avoid future headaches, let’s check what penalties apply for incorrect tax filings.
1. Penalties for filing a tax return on time but underpaying taxes
- A surcharge of 0.5 to 1 time the unpaid tax amount
- Additional interest of 1.5% per month on the unpaid tax, calculated from the due date until full payment is made
2. Penalties for failing to file a tax return on time
- A maximum criminal fine of 2,000 baht
- A surcharge of 1 to 2 times the unpaid tax amount
- Additional interest of 1.5% per month on the unpaid tax, calculated from the due date until full payment is made
3. Penalties for intentionally not filing a tax return to evade taxes
- A maximum criminal fine of 5,000 baht or imprisonment for up to 6 months
- A surcharge of 2 times the unpaid tax amount
- Additional interest of 1.5% per month on the unpaid tax, calculated from the due date until full payment is made
4. Penalties for tax evasion
- A criminal fine ranging from 2,000 to 200,000 baht or imprisonment from 3 months to 7 years
- A surcharge of 2 times the unpaid tax amount
- Additional interest of 1.5% per month on the unpaid tax, calculated from the due date until full payment is made
Health insurance is another option for managing taxes while also providing health coverage. Besides ensuring access to medical care, it also qualifies for tax deductions as permitted by law. Choosing the right health insurance plan can help you reduce medical expenses and maximize your tax deduction benefits.
For more information:
☑️ Call Tel. 1766, available 24/7.
☑️ Contact a life insurance agent, or a branch of KASIKORNBANK or Land and Houses Bank.
- Please study the details of coverage, conditions, and risks before making a decision to purchase insurance.
Sources: Retrieved on10/04/68