Explainer: How to file annual tax returns before March 31 – LIRS

Ahead of the March 31 deadline for filing individual annual tax returns, the Lagos State Internal Revenue Service (LIRS) has provided guidance on who must file, the documents required, and the consequences of failing to comply.

In an interview with BusinessDay, Foluso Mustapha, the director of Tax Audit at LIRS, explained the obligations for taxpayers, including employees, freelancers, and individuals with multiple sources of income.

Below are key questions and answers to guide taxpayers.

What is an individual annual tax return, and who must file?
An individual annual tax return is a formal declaration submitted to the tax authority showing income earned in the previous year, along with deductions and reliefs claimed.
According to LIRS, the obligation applies to all taxable residents, including employees, business owners, freelancers, and individuals with other sources of income.
“An individual tax return is a formal declaration expected to disclose all income, deductions, and reliefs applicable to the taxpayer for the preceding year,” Foluso said.

Read also: How Nigeria’s widening tax net is capturing everyday transactions

Is filing tax returns mandatory?
Yes.
LIRS says filing annual returns is a statutory obligation for all taxable residents, even if they eventually have no additional tax to pay.
“Filing is not optional. It is a statutory obligation imposed on every taxable individual resident in Lagos State.” Foluso said

What is the deadline and penalty for failing to file?

The deadline for filing individual tax returns is March 31 of every year.
Failure to file may attract penalties of N100,000 for the first month and N50,000 for each additional month of default, according to LIRS.

Foluso also explained that persistent refusal to pay an established tax liability could trigger what is known as power of substitution, which allows the tax authority to recover the debt through third parties.
“Power of substitution applies where a taxpayer refuses or fails to pay an established tax liability after due notice,” he said.

Under this provision, the tax authority may appoint any person or institution holding funds on behalf of the taxpayer, such as a bank, business partner, or tenant, to remit those funds directly to settle the outstanding tax debt.
However, he clarified that the measure is only applied after the liability has been properly established and the taxpayer has failed to comply.

If my employer deducts PAYE, do I still need to file?
Yes.
LIRS explains that PAYE deductions made by employers are only advance payments and do not replace the requirement for individuals to file annual returns.
Employees must still declare other sources of income, such as rent, investments, or side businesses.
“PAYE is a withholding mechanism and not a substitute for filing obligations,” Foluso explained.

Read also: Inside Lagos’ informal tax system

What if I earned little or no income during the year?
LIRS says taxpayers are still expected to file returns even if their income is below the tax threshold.
In such cases, individuals can submit a nil return to indicate that no tax is payable.

What documents are needed to file tax returns?
According to LIRS, taxpayers should prepare documents such as: salary or payroll records, financial statements (for business owners), bank statements, rent receipts, investment income records, and evidence of deductible expenses.

These documents help determine the taxpayer’s accurate tax position.

What should first-time filers do?
First-time taxpayers should:
Obtain a Tax Identification Number (TIN)
Gather records of income earned during the year
Identify deductible expenses
Complete the appropriate tax return form on the LIRS portal.
This process applies to employees, business owners, freelancers, and gig workers.

Do freelancers, content creators, and gig workers need to file?
Yes.
LIRS says income earned through digital platforms, freelance work, or online businesses must also be disclosed when filing tax returns.
This includes earnings from brand partnerships, digital platforms, and other independent work.
Are retirees or people who changed jobs during the year required to file?
Yes.
While pension income may be exempt from tax, retirees who earn income from other sources, such as rent, investments, or business activities, must declare those earnings.
Individuals who changed jobs during the year are also expected to file returns to reconcile income from multiple employers.

Does filing tax returns mean I will pay more tax?
Not necessarily.
According to LIRS, filing a tax return simply establishes the taxpayer’s correct tax position.
“Filing a return does not create new tax. It simply establishes your correct tax position based on income actually earned.” Foluso explained.

Is there a cost for filing annual tax returns?
No.
Filing annual tax returns with the tax authority is free. Taxpayers can submit their returns online through the tax portal.

What should taxpayers do if they make a mistake while filing?
LIRS says taxpayers who discover errors after submitting their returns can file an amended return or voluntarily disclose the mistake to correct their records.

How can taxpayers avoid tax scams?
Taxpayers should be cautious of individuals impersonating tax officials.
Legitimate tax authorities do not demand payments through unofficial channels or request sensitive personal information without verification.
Suspicious communications should be reported through official channels.

 

Foluso said tax compliance is critical to funding development in Lagos State.
“Tax compliance is not merely an administrative function; it is the financial lifeblood of Lagos State,” he said, noting that tax revenues support infrastructure, healthcare, education, and transportation projects across the state.
Foluso added that voluntary compliance by taxpayers helps the government sustain these investments and expand services for residents.
“As residents continue to fulfil their tax obligations, the state is better positioned to deliver infrastructure and public services that improve the quality of life in Lagos,” he said.