Published On: 04/12/2025By

For many HR teams, preparing the EA Form feels like a routine year-end task — but to LHDN, it’s one of the most important documents used to verify payroll accuracy, PCB compliance, and employer reporting practices.

Even small errors can raise red flags, lead to audits, or trigger requests for clarification. To help employers avoid compliance issues, here are the most common EA Form mistakes that catch LHDN’s attention — and how using a reliable HRMS like Pandahrms helps eliminate these risks.

1. Wrong Categorisation of Income (Section B)

This is one of the biggest and most frequent mistakes.

LHDN closely checks whether employers correctly separate:

  • Allowances

  • Perquisites

  • Benefits

  • Reimbursements

Common errors that trigger flags

  • Outstation allowance mistakenly reported as reimbursement

  • Petrol card listed under the wrong category

  • Meal allowance not properly classified

  • Perquisites bundled together with non-taxable items

Incorrect categorisation affects taxable vs. non-taxable income — a major audit trigger because it directly impacts PCB accuracy.

How Pandahrms helps:
The system auto-classifies income types according to LHDN requirements, reducing human error and ensuring clean, compliant EA Form data.

2. Missing or Underreported Benefits-in-Kind (BIK)

BIK is one of the most heavily scrutinised components in the EA Form.

Red flags include:

  • Company car not declared

  • Phone, laptop, or device benefits omitted

  • Housing, parking, or driver benefits not recorded

  • “Small” benefits accidentally left out

Underreporting BIK can be seen as an attempt to minimise taxable income — leading to immediate investigation.

Pandahrms advantage:
HR teams can track and assign BIK items systematically with clear audit trails, ensuring nothing is missed during reporting season.

3. PCB (MTD) Figures Don’t Match Monthly Payroll Records

LHDN performs cross-checks between your EA Form and:

  • Monthly PCB deductions

  • CP39 submissions

  • Employer records under Form E

Red flag scenario

If the PCB total in EA Form differs from your system records, it signals:

  • Miscalculation

  • Missing months

  • Incorrect manual overrides

This mismatch alone is enough to trigger further review.

Pandahrms solution:
PCB calculations are automated and applied consistently every month — ensuring year-end totals match perfectly.

4. Inconsistent Totals Between EA Form, CP8D & Form E

LHDN expects all statutory reports to align. Any mismatch indicates a risk of underreporting or uncoordinated payroll processes.

Example of red-flag inconsistencies

  • EA Form shows RM68,000 annual income

  • Form E declares RM65,000

  • CP8D records RM70,000

These inconsistent totals suggest poor payroll consolidation or manual data entry mistakes — both major audit triggers.

With Pandahrms:
All payroll data flows into EA Form, CP8D, and Form E consistently, ensuring aligned totals across every statutory report.

5. Missing Compensation for Resigned or Terminated Employees

LHDN frequently reviews EA Forms of employees who resigned or were terminated — because these cases are often processed manually and prone to mistakes.

Common red flags

  • Final salary not included

  • Unpaid leave encashment missing

  • Gratuity or compensation for loss of employment not declared

  • Incorrect PCB calculation for partial working months

Pandahrms benefit:
Final payments and encashments are automatically computed according to statutory rules, reducing risk of omissions.

6. Using Outdated EA Form Formats or Manual Templates

LHDN updates tax codes, fields, and reporting categories periodically.

Using old templates can cause:

  • Missing new fields

  • Incorrect tax classifications

  • Wrong sequencing of data

  • No audit trail for changes

Manual EA Forms also increase calculation risks and make it harder to defend your data if LHDN requests clarification.

Pandahrms ensures compliance by:
Automatically updating EA Form formats every year based on LHDN’s latest requirements — no manual editing needed.

How Pandahrms Helps Employers Avoid EA Form Penalties

Pandahrms is built to eliminate compliance risks by offering:

  • Automated income categorisation

  • Accurate PCB calculations

  • Consolidated payroll data for EA, CP8D & Form E

  • Transparent audit trails

  • Updated statutory formats

  • Error-free final payments for resigned employees

This ensures HR teams produce clean, compliant, LHDN-ready EA Forms every year.

Final Thoughts

EA Form mistakes may look small, but LHDN treats them seriously. By understanding these common red flags — and using an integrated HR & payroll system — employers can avoid audits, prevent penalties, and provide employees with accurate, transparent income statements.

With Pandahrms, your EA Form process becomes smoother, faster, and fully compliant — so your team can focus on year-end operations with confidence.