Tax filing mistakes remain a major issue in Nigeria, with many individuals and businesses still facing avoidable penalties due to errors in documentation, calculations, and reporting.
Despite efforts to modernise the tax system and introduce digital filing platforms, gaps in awareness and poor record-keeping continue to affect compliance—especially among small business owners and self-employed individuals.
According to tax experts, a large portion of penalties recorded each year comes from repeated, preventable mistakes rather than the complexity of tax laws. As filing deadlines approach, these issues tend to become more obvious, increasing the risk of costly errors.
One of the most common problems is missing deadlines. Monthly filings like Value Added Tax (VAT) and Withholding Tax (WHT), usually due by the 21st of the following month, are often overlooked. Individuals also struggle with the March 31 deadline for annual income tax returns, particularly those earning from multiple sources. Companies are expected to file within six months after their financial year ends, but delays are still frequent. Under the Nigeria Tax Administration Act (NTAA) 2025, failure to file can attract a penalty of ₦100,000 for the first month and ₦50,000 for each additional month of delay.
Errors in tax calculations are another major issue. Some taxpayers apply incorrect rates, ignore allowable deductions, or miscalculate taxable income. This can lead to underpayment—which attracts penalties—or overpayment, which affects cash flow. The law treats incorrect filings just as seriously as failure to file at all.
Poor record-keeping also creates serious challenges. Many businesses lack proper bookkeeping systems, making it difficult to track income and expenses accurately. Without documents like receipts, invoices, or contracts, taxpayers may lose valid deductions during audits, increasing their tax burden. The law imposes penalties for failing to maintain proper records, with individuals and companies both affected.
Another critical issue is the failure to remit collected taxes. Some businesses deduct VAT or WHT but fail to remit it to the appropriate authorities. This is considered a serious offence and attracts penalties, including fines and interest on the unpaid amount.
Closely related is the mismanagement of withholding tax. Businesses sometimes fail to deduct it where required, deduct the wrong amount, or neglect to obtain proper documentation after payment. Without these records, they cannot claim tax credits, leading to higher tax liabilities.
There is also a common misconception that tax returns only need to be filed when there is income. In reality, even businesses with no activity are required to file “nil” returns. Failure to do so is treated as non-compliance and attracts penalties.
Misclassification of workers and expenses is another recurring problem. Some employers label workers as independent contractors to avoid PAYE obligations, while others mix personal expenses with business costs. These practices often trigger audits and penalties when discovered.
Inaccurate income declaration is also widespread, especially among individuals with multiple income streams. Earnings from freelance work, investments, or side businesses are sometimes left out, leading to incomplete filings and potential sanctions.
Overall, these recurring mistakes highlight a broader issue of low tax awareness and weak compliance systems. As deadlines draw closer, taxpayers are advised to file early, keep proper records, and seek professional guidance where necessary. Avoiding these common errors is key not only to escaping penalties but also to improving compliance across Nigeria’s tax system.
