Record keeping January 03, 2019
The Importance of Record-Keeping
IRAS has recently come out with a well-prepared video clip on the importance of record-keeping for self-employed persons such as insurance agent and real estate agent. The following is a brief summary of the points from the clip.
A commission agent (e.g. insurance agent, real estate agent etc.) is considered as a self-employed person. As a self-employed, he or she should file the income earned under business income and is required to prepare 2 or 4-line statement for income tax filing.
It is important to note that IRAS does not accept estimates in tax reporting. As such, all sales should be recorded to ensure accurate reporting of revenue and claims should be based on actual amounts stated on bills or receipts. Keeping proper business records will allow income earned and businesses expenses incurred to be readily determined for tax filing purposes, thereby reducing tax compliance costs.
Some examples of the types of records a self-employed person is required to keep include:
- Source documents that substantiate all business transactions e.g. receipts and invoices issued to customers or received from suppliers, bank statements;
- Accounting records, schedules documenting a business’ assets and liabilities, profits and losses; and
- Any other written records of transactions related to the business.
A good practice would be to photocopy thermal receipts so as to keep them legible before they fade over time. In addition, if a supplier does not provide receipts, payment vouchers should be prepared with details of the expense (e.g. date of purchase, payee’s name, purpose of incurring the expense, nature of the item and the amount) and signed by the supplier.
Besides keeping proper records, it is important for self-employed persons to ensure that only allowable business expenses are claimed in their individual tax returns.
The following business expenses are allowable:
- The expenses incurred in producing the income
- The expenses related to the business
- The expenses which are not personal and private in nature
- The expenses which are not capital in nature
For more information on allowable business expenses, please visit the link here.
In summary, it is the responsibility of commission agents to ensure proper business records and accounts of business transactions are kept for at least 5 years. With a record keeping system in place and a habit of updating the records diligently, the business will benefit in the long run.