20 mistakes the SAT** will not condone - Part I
Working in a freelance capacity earning professional fees or running your own business involves two basic, key facts: you will usually have more leeway in managing your work schedule and you will need to comply with the fiscal obligations that such independence entails.
To avoid being given a hard time on filing your annual (tax) return, it is important to take into account the following frequently-made taxpayer mistakes.
The SAT website offers computer support in the form of a guideline of the most frequently-made mistakes, because trying to deduct business operation-related expenses, or failing to issue receipts (proof of payment or purchase) can get you into trouble.
Remember, from the moment you register as an individual (or as a legal entity if a company) you have a tax-payment obligation - the most frequent taxpayer mistakes are made here:
When Registering With or Enrolling in the Registro Federal De Contribuyentes or RFC (Federal Taxpayer’s Registry)
Mistake #1. Abbreviating your name when filling in the tax form, or omitting any name or surname. Changing or leaving out any word or letter in the company’s business or registered name.
How to avoid making this mistake: If you have two or more names, you should note down all of them, making sure they are complete. If your name is abbreviated on your birth certificate, you should fill in the tax form with the exact name as it appears on the birth certificate. In the case of legal entities, the company’s business or registered name must coincide with the name that appears on record, or as it appears in the incorporation document.
Mistake #2. Submitting proof of address with an address different from that indicated on the tax form when submitting your registration paperwork.
How to avoid making this mistake: The proof of address used should not be over three months old, save for a property tax payment receipt, or a payment receipt for utilities, such as electricity, water or telephone, none of which should be over four months old.
Mistake #3. Writing down a date of birth on the tax form which does not coincide with the date on the birth certificate.
How to avoid making this mistake: The date you fill in on the tax form must match the date that appears on your birth certificate, since the accuracy of the Federal taxpayer registry key depends on that.
Mistake #4. The identification you use in the RFC registration proceedings (paperwork, formalities, etc.) is not recognized as an official form of identification.
How to avoid making this mistake: Present any of the following documents as official identification: a voter identification card issued by the Federal Electoral Institute, a valid passport, a professional license ID or a National military service ID card.
If you are a foreigner, you may submit a current immigration document issued by a competent authority (if applicable, an extension or renewal of the immigration document).
Mistake #5. Re-register or re-enroll in the RFC when you had done so previously.
How to avoid making this mistake: Enrollment or registration in the RFC is done only once, even when the previous operations or activities have been suspended; if you cannot recall whether or not you are enrolled, it is recommended that you go to your closest Taxpayer Assistance Module and verify your tax status.
Mistake #6. Having another person sign your tax form without their having the authority to do so.
How to avoid making this mistake: Any transaction/paperwork must be signed by you or your legal representative. Under no circumstances can the accountant, agent/administrator, or any other person who is not your legal representative sign for you.
When Paying Your Taxes or Filing (Tax) Returns
Mistake #7. Making payments after the established deadline, exclusive of surcharges and adjustments.
How to avoid making this mistake: Be aware that if you pay taxes after the deadline, the amounts payable must be restated or adjusted, and you also need to cover the corresponding surcharges as of the date on which payment was made.
Mistake #8. Failing to file returns for monthly income tax (Impuesto sobre la Renta in Spanish, abbreviated ISR) due to being under the Professional Services Regime (a freelance capacity earning professional fees) and working for legal entities. (Such persons believing that what they withhold is sufficient to comply with this obligation).
How to avoid making this mistake: Any person earning a regular income for professional services (freelance capacity earning professional fees) must file monthly income tax returns; in said return, the tax withheld by the company or institution where they provide such services may be deducted. If on calculating the tax, there is no amount due, they need only submit a return disclosing the reasons why there is no payment (Nil Return); if subsequent returns within the same year prove to be the same, they are no longer filed.
Mistake #9. Failure to pay or file returns within the corresponding time frame.
How to avoid making this mistake: As a rule of thumb, (tax) returns or payments should be filed or paid monthly, as the case may be, and no later than the 17th of the month following the corresponding payment. The annual return is filed between January and March for legal entities and in April for individuals. If this time frame is not met, the SAT may at any time require you to personally appear, which already implies the payment of a fine.
Next week we will publish the rest of the mistakes the SAT will not condone.
If you have any specific doubts or concerns relative to your accounting or tax payments, send us your question! We are here to help you.
**SAT = Servicio de Administracion Tributaria or the Tax Administration Service, similar to the Internal Revenue Service in the United States
Source: http://www.cnnexpansion.com
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