The Right Way to Fix Mistakes in Tax Return how to Revised tax return? It has often been observed that many people, for whatever reason—whether due to ignorance, carelessness, or with the help of an unskilled person—file their tax returns incorrectly.
Sometimes, there are errors in the returns of previous years, for example, some property or asset is not declared, some income or inheritance is missed, or some entry is overstated.
The question arises, how to correct such errors?
How to correct previous year tax return error.
Most taxpayers assume that they can adjust prior year errors on their current year return, even though the right approach is to correct the error in the same fiscal year in which it occurred.
If the error is in an asset, liability or any part of the wealth statement, it is important to revised it in all subsequent years after its correction, because every year the balance of the wealth statement is carried over to the next year.
For example, if the error occurred in 2022, the 2023, 2024, and 2025 returns would also be corrected to maintain continuity and correct all years of record.
The Right Way to Fix Mistakes in Tax Return How to Revised tax return?
The taxpayers can revise return within sixty days of filing of return If your revision does not result in any reduction in taxable income, then you do not need any approval, you can file the revised return without any hustle.
When the approval of FBR is required for revision?
If 60 days have passed, the approval of the Commissioner is mandatory for revising the return. However, if you revise within 60 days, but it shows a significant increase in your income or funds, then the approval of the Commissioner will still be required, even if the 60-day period has not been completed.
To get the approval of the Commissioner, you have to provide all the necessary evidence and supporting documents.
Moreover, all amendments or corrections can be made only before the issuance of Section 122(9) notice. If a notice under section 122 or 122(9) is issued, then revision is blocked in iris system.
Example
For example, if an employee declares more income than his actual salary, this results in both taxable income and tax payable being increased. To avoid paying more, the taxpayer usually declares the withholding taxes in proportion to the amount withheld.
If it is later proven that the tax declared was not actually deposited, a show cause notice will be issued stating that the tax amount was due based on your declared salary but was not paid.
To correct this mistake, the taxpayers has to provide all supporting documents such as salary slip, bank statement.
Is FBR approval required to make changes to the wealth statement?
No, approval is not required for this, however, the wealth statement cannot be changed after five years.
What will be the consequences if mistakes are not corrected in time?
If you do not correct your mistake in time, you may face several problems later. It depends on the nature of the mistake and its possible consequences.
If the figures not reported correctly?
For example, if you have understated your sales or overstated your expenses or withholding taxes then ultimately you will have to repay the government dues along with penalty, which may be equal to a minimum of Rs. 30,000 or 5% of the tax payable (whichever is higher).
If the assets are hidden?
Similarly, if you mistakenly undeclared or understated your assets, and later purchased a new asset (e.g. property), the FBR may issue you a notice for concealment of income. In this case, the FBR may assume that the money used to purchase the new property was actually your undeclared income and was later invested in the new asset.
Now the financial loss of this mistake will be that you may have to pay tax on the entire value of the asset you have purchased, because the FBR will consider this amount as you have made by hiding your income.
Example
If your annual income is Rs 1,200,000, then you will have to pay Rs 90,000. But if you declare only Rs 200,000 then you are hiding an income of Rs 1 million. In three years, this amount becomes Rs 3 million.
Later on When you buy a property worth Rs 3,200,000, the FBR considers it as hidden income and will imposes a tax of around Rs 6,500,000 whereas if you had paid taxes regularly every year, you would have had to pay only Rs 270,000 Thus, you have to bear an additional loss of around Rs 380,000.
Why it important to declared your all assets?
That is why it is important to declare all your assets correctly so that you do not face any major financial problems later.
Some people think that if they declare all the assets, they will be taxed, although this is not the case. If your assets are made from legal income and you have already paid taxes on this income, then you do not have to fear any additional taxes.
For more information about The Right Way to Fix Mistakes in Tax Return how to Revised tax return? Please contact us through our website by filling out the Contact Us form, or reach out via our social media accounts
