As conversations around taxation and compliance grow louder across Nigeria, many citizens continue to ask a simple but important question: Who actually needs to file an annual tax return? For many, the process still feels unfamiliar, even intimidating.

In a recent studio conversation aimed at demystifying the subject, Special Adviser to the Chairman of the Lagos Internal Revenue Service, Abideen Akande, offered a clear and detailed explanation of the annual tax return process, the responsibilities of taxpayers, and the reforms designed to make compliance easier for residents of Lagos.

Speaking with calm authority, Akande described the annual tax return not as a bureaucratic burden but as a civic obligation embedded in Nigeria’s constitutional framework.

According to him, every Nigerian citizen and every resident earning income within Lagos is expected to file an annual tax return with the state tax authority. The process simply requires individuals to declare the income they earned during the previous calendar year.

YOU CAN ALSO READ: How Women in Energy Are Reshaping Africa’s Path to Sustainable Growth

“The annual tax return is essentially a constitutional obligation,” Akande explained. “What you are doing is reporting the income you received in the preceding year, from January 1 to December 31, and indicating the taxes that have already been paid on that income.”

The return allows taxpayers to disclose how much they earned, how much tax was deducted by employers or paid in advance, and whether any outstanding tax remains.

Once submitted, the Lagos Internal Revenue Service reviews the information and determines one of three outcomes. The taxpayer may have paid the correct amount and owe nothing further. The authority may determine that additional tax is due and request payment within a specified period. In some cases, however, the taxpayer may have paid more tax than required.

Akande noted that recent tax reforms have introduced greater flexibility for taxpayers who discover they have overpaid.

Under the new provisions, individuals who have excess tax credits are no longer restricted to carrying the balance forward to future tax years. They can now choose whether to apply the credit to future obligations or request a refund from the government.

“The law now gives taxpayers the option to decide how they want to use their credit,” he said. “If you want your money refunded, the tax authority is required to process that refund within ninety days.”

Beyond compliance, Akande emphasized the importance of maintaining accurate financial records. In a country where many people operate in informal economic settings and receive income through multiple channels, record keeping can sometimes be overlooked.

However, he explained that proper documentation is critical, not just for tax reporting but also for personal financial planning.

“When people keep records, they are not only helping the tax authority,” he said. “They are helping themselves to understand their financial position and plan properly.”

The absence of proper records, he warned, can complicate matters. In situations where taxpayers cannot demonstrate their earnings, the tax authority may apply a presumptive tax assessment, estimating income based on available indicators.

Even so, Akande revealed that data reviewed by the Lagos Internal Revenue Service suggests that many individuals may actually fall below the taxable threshold.

“Based on the records we examined from previous assessments, if the new tax rates are applied, more than half of the people currently in our system would not even pay tax,” he explained. “But without proper records, it becomes difficult for taxpayers to demonstrate that.”

Another misconception Akande addressed is the belief that employees whose taxes are deducted directly from their salaries do not need to file annual returns.

In reality, he said, the filing requirement applies to everyone.

Employers submit records of employee salaries and tax deductions to the tax authority, but individual taxpayers must still file their own returns to confirm those records and disclose any additional sources of income.

Many Nigerians earn money from investments, rental properties, freelance work, or other passive streams of income that may not be captured through payroll deductions. Filing a return ensures that these earnings are accurately declared.

“Declaring your income does not automatically mean you will pay tax,” Akande said. “It simply allows the system to determine whether you owe anything or whether you might even be entitled to a refund.”

To simplify the process, the Lagos Internal Revenue Service has invested heavily in digital systems designed to make filing easier and more accessible.

What was once a six page paper form has been reduced to a streamlined digital form that can be completed online. The state transitioned from a hybrid filing system in 2018 to a fully electronic platform by 2022.

Today, taxpayers in Lagos can file their annual returns through the official LIRS online portal, which includes a digital assistant that guides users step by step through the process.

For individuals who may still require assistance, the agency also provides support through call centres and help desks located in LIRS offices across the state, all at no cost to taxpayers.

Akande also addressed another common point of confusion: whether individuals should file their returns with the federal government or with their state authority.

For most Nigerians, the obligation lies with their state internal revenue service. Only a limited category of individuals, including members of the armed forces and police, file directly with federal tax authorities.

For residents of Lagos, the filing responsibility rests with the Lagos Internal Revenue Service.

The adviser also highlighted new enforcement measures introduced under the revised tax framework. The updated law now imposes stronger penalties for individuals who fail to submit their returns on time.

Under the provisions, taxpayers who miss the filing deadline face a penalty of one hundred thousand naira for the first month of default, followed by fifty thousand naira for each subsequent month of non compliance.

The intention, Akande explained, is to encourage timely compliance rather than punish taxpayers.

YOU CAN ALSO READ: Lagos’ Bold Bid to Join the World’s Top Financial Centres

“Our previous system unintentionally encouraged people not to comply,” he said. “The new structure has changed that completely.”

Even retirees are expected to file annual returns, although their pension income remains exempt from taxation. However, if a pensioner receives income from other sources such as investments or rental properties, those earnings may still be subject to tax.

“What we tax is income, not the individual,” Akande noted. “A pensioner may not pay tax on pension income, but other sources of income must still be declared.”

As Nigeria continues to modernize its tax administration, Akande believes awareness and education will play a critical role in improving compliance across the country.

For many Nigerians, he said, the most important step is simply understanding that the annual tax return is not as complicated as it might appear.

“At its core, filing a return is simply about declaring what you earned,” he said. “And today, the system has been designed to make that process as simple and transparent as possible.”