In relation to each Basis Period (1 January - 31 December), employers must lodge their employee’s income with the IRAS or issue IR8A forms to their employees by 1 March each year. Following that, employees must declare their annual income with the IRAS by 15 April each year (electronic lodgement cut off is 18 April).
This article will guide you through the process of ensuring that the settings in the payroll software are correct for both the business and employee when it comes to end of year, and will highlight any relevant reports that can be used.
These steps should be taken prior to lodging your employees income details.
1.1. Review Configuration Data
The IRAS Settings can be accessed through Payroll settings > Statutory reporting settings. From here, you are able to select whether you will be lodging the income data electronically (via the AIS) or manually (via forms). If you select the electronic option, you will not be able to change this selection once data has been lodged. More information can be found here.
Business phone number
In order to lodge electronically, the business needs to have a listed phone number. You can check this on the Payroll settings > Details page.
Employee email address
Ideally, each employee should have an email address on file. This will then allow you to send a notification email directly from the platform to your employees after you have lodged the IRAS Lodgement report to notify them that their Income information is ready. These notifications will go to the email address on the employee's details page. A quick way to check these details is to export the employee list and review the data in Excel. You can find steps on how to do that here.
Employee date of birth
In order to lodge electronically, the employee date of birth is required. You can check this on the Employee file > Details page.
Review your Pay Categories to ensure that the 'Payment Classification' field is correct (see image below):
Please note: If the 'Payment Classification' was set up incorrectly, it only needs to be fixed at the pay category level, not on a per individual employee basis.
Review your set of Deductions. For any system default deduction categories, the payment classification will already be set and you are unable to edit the payment classification of these:
When you apply a payment classification to a deduction category, any deductions made using the deduction category will be reported in the relevant part of the employee's remuneration summary to the IRAS. The various options should be used as follows:
- Donation: Any amounts you pay to self help groups (SHG’s) or Community Chest on behalf of your employees
- Contribution: Any amounts you pay to the Mosque Building Fund on behalf of your employees
- Life Insurance Premium: Any amounts you pay for Insurance Premiums on behalf of your employees
If none of these options describe the intended use of the deduction category, leave the 'Default' option selected.’
1.2. Initial Values / Opening Balances
If you have migrated to this payroll system from another system during the basis period, it is important that the opening balances are set up correctly.
If you do need to enter opening balances this article will assist - Setting Employee Opening Balances (Initial Values).
If you set up this payroll system for your business in the previous basis period but didn't start using it until this basis period, you may need to review the initial financial year setting under your business settings. To do this go to 'Payroll Settings' > 'Business Settings' > 'Opening Balances' and configure the correct 'Initial Basis Period':
Amounts added to opening balances are included in earnings for the year and will be included in both the IRAS and CPFB reporting based on pay category settings
1.3. Finalise Pay Runs
Ensure that all pay runs are finalised, including any adjustments you need to make. If you complete your IRAS Lodgement and then have to process adjustment pays, you MUST lodge an amendment to refresh the data and submit any differences so we strongly suggest you hold off on commencing the finalisation process until you are 100% confident all pays for the financial year have been processed. More about the IRAS Lodgement report can be found here.
Please Note: The date the pay run is PAID determines which basis period it falls within for reporting purposes.
E.g. Pay run period ending 30/12/2020, PAID 31/12/2020 will be included in the 2021 year of assessment.
Pay run period ending 31/12/2020, PAID 1/1/2021 will be included in the 2022 year of assessment.
If you want to include every day worked within the basis period, you might have to split a pay run.
For example, a Weekly pay run for period ending 2/1/2021, paid 3/1/2021. Create a pay run as normal and set the pay period ending 31/12/2020, ensuring you stipulate date paid to be 31/12/2020. Adjust the employee hours to reflect the hours worked for 27–31 December and finalise the pay run. Now create another pay run for the period ending 2/1/2021, adjust the employee hours to reflect the hours worked for 1–2 January and finalise this pay run using the normal date paid, eg 3/1/2021.
2. Generate IRAS lodgement report
Ready to proceed?
Once you have completed the steps above, you will be ready to generate, download and publish annual income details for your employees via the IRAS Lodgement report. See here for instructions
The following reports are relevant in relation to the End of Year process are available within the payroll system:
- IR8A details report: The IR8A details report lists the total earnings for the selected basis period. The values displayed should align with the values displayed in the IRAS Lodgement report and associated IRAS forms.
- IRAS Lodgement report: Allows you to generate, download and publish annual income details for your employees.
- Additional IR8A forms: Includes appendix 8A, appendix 8B, IR8S forms. These forms will be produced if an employee has received benefits in kind OR if they have made any gains/profits from employee share plans OR if there were voluntary employer CPF contributions made
- Benefits in Kind report: Although this report is purely for information purposes it is handy during the end of year process as it gives an indication of which employees should have an Appendix 8A form produced at the end of the basis period.
- Employee Share Plans report: Although this report is purely for information purposes it is handy during the end of year process as it gives an indication of which employees should have an Appendix 8B form produced at the end of the basis period.
- Excess CPF contributions report: Although this report is purely for information purposes it is handy during the end of year process as it gives an indication of which employees should have an IR8S form produced at the end of the basis period.
The following reports are relevant in relation to the End of Year process, however, these are NOT available within the payroll system, and will have to be managed manually:
- S45: If withholding tax is deducted from an employee’s income, the employer must complete a S45 notice and pay the withheld tax to the IRAS by the 15th of the month following the payment. The S45 notice can be lodged through the mytax portal via an online form or spreadsheet upload
- IR21: Employers must obtain tax clearance for foreign employees who are ceasing employment and leaving the country. This clearance will confirm the amount of tax to be deducted from the final pay. To obtain tax clearance employers must submit an IR21 notice to the IRAS. The IR21 notice can only be submitted via a paper form in the post or via the my tax portal.
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