Tax Returns - The Deadline is approaching!
Friday, 16 October 2009
Tax Returns Deadline: Friday, October 16th, 2009
Money expert, Liam Croke, is on hand as always to allay our fears and take us through the steps.
Tax returns must be filed by October 31st or a fine is incurred.
Liam Croke: Money Expert
Liam has worked in the financial services industry for the past 21 years and seen by many as an expert in the field of personal finance. He is a qualified financial and mortgage advisor.
In the past he has held senior management positions with two well known financial institutions along with one of the "top 5" accountancy practices in Ireland.
Liam gives his advice and wisdom on a daily basis to those who are just starting out to high net worth individuals. He currently works for a financial services company based in Limerick.
He is frequently asked to contribute and comment in all areas relating to personal finance on both national and local radio stations. You will have heard him for example recently on RTE's "The Mooney Show" and on Newstalk's "The Right Hook."
Liam was invited to make a presentation to the Joint Oireachtas Committee on Social & Family Affairs on trends and levels of personal debt in Ireland. He made his presentation to the committee on the 24th June 2009.
Liam is author of 4 personal finance books:
. The best selling "The Mortgage Maze Explained" published by Currach Press in 2006.
. The best selling book "Your Money Your Life - Managing your finances in today's Ireland" published in 2007.
. "I'm Broke! A teenagers guide to Money" - Published by Crabtree and distributed in the UK & USA in 2009
. "Stash or Splash" which is being released in Ireland and the UK in September of this year.
. Liam previously wrote a weekly personal finance column for The Sunday World entitled "Mr. Cash - How to Save it, Spend it, Earn it" and has also written articles for the Sunday Business Post, the Evening Echo, the Sunday Independent, the Irish Sun, Prudence Magazine to mention just a few.
Doing your tax returns
It's that time of the year again! The deadline for tax returns is due at the end of this month or the middle of November if you are filing online. It is estimated that close to half a million people will have to make a tax return in the next few weeks.
There is no doubt that filing a tax return can be a stressful experience to say the least even if you have very little entries to make. The closer you approach this deadline the more stressful it will become so what can you do to minimise this stress?
Liam will discuss the following:
. Who needs to make a tax return?
. When the deadline is for making your return
. Your options when calculating your preliminary tax
. Late Fees and Penalties
. What first Time Self employed need to do
. Briefly mention the online service for those doing it themselves.
. 5 Tax Tips to finish
Well first off who needs to make a tax return?
o People who are outside of the PAYE system - self employed people (those who carry on their business including farming, professions or vocations)
o People where the majority of their income is paid under PAYE but not all of it.
For example:- investment income, profits from rental income, foreign income and foreign pensions, profits from share options, if you are separated and receiving maintenance payments (or indeed if you are the person making these payments you are entitled to tax deduction etc).
When is the deadline for making tax returns?
o Pay preliminary tax for 2009 on or before the 31st October if making a paper return or the 16th November if returning online
You have 3 options:-
1. 90% of your final liability for 2009
2. 100% of your final tax liability for 2008
3. 105% of your final liability for 2007
Pay any balance of tax due for the previous year or before the 31st October
Pay any capital gains tax on disposals made between the 1st January and 30th September of the current tax year. This capital gain has to be paid by the 15th December. Any gains realised in December '09 have to be paid by the end of January the following year.
Given the introduction of the income levy this year you may need to pay this in your preliminary tax payment for 2009. If you are paying 90% of this year's liability or 100% of last years then you have to increase the amount owed to factor in the income levy. You may be able to avoid this if you pay 105% of your 2007 liability as this income is not subject to the income levy and this approach might suit some people but if you do choose this route you will have to move quickly as this payment has to be done by way of direct debit.
If you feel that you have a particularly complex return or you are doing this for the first time then you might want to consider hiring an accountant and up to three quarters of people do use the services of an accountant. The cost will depend on the time involved in preparing your return but budget for at least €500.
If you have a relatively simple return then you may be perfectly able to complete the return yourself. There is that belief that if an accountant prepares and signs off on your return that that will be that but you are just as likely to be the subject of an audit if you did it yourself or through an third party.
A lot of people don't have an accountant because they never needed an accountant as the majority of their income is tax through the PAYE system but they are brought into self assessment because they have income through rental properties or investments. If you are this type of person then you might easily be able to mange the return all by yourself but as I said maybe if you are doing this for the first time, engage a third party and learn from them what to do so come next year you can do it yourself.
Late Fees and Penalties:-
If your tax return is submitted late either through the on line system or paper filing then you will be liable to a surcharge which can be very expensive. For example if you file within 2 months after the due date then you will be liable for a charge of 5% on the tax owed up to a maximum of €12,695 and 10% after 2 months.
So if your tax bill is €10,000 and you are 1 month late your fine will be €500 and if you are 3 months late your fine will be €1,000.
First Time Self Employed:-
If you are a first time self employed person (and many people will be you should be aware of a number of things:
o Register with the Revenue as being a self assessment taxpayer. You may also have to register for VAT. You might need to register your business name with the company registration office.
o Being self employed proper books and records need to be prepared along with back up documentation such as receipts and sales invoices. You will not get a tax deduction for expenses if you do not hold onto receipts or have things like bank records or cheque stubs which will show when the expense was incurred, the amount and the nature of the expense.
o Seek help from a tax advisor or a qualified accountant if you are in doubt as to what you need to do or how you fill in your tax return proper
What is the Revenue On - Line Service?
This is an internet service that allows people to make quick and secure tax returns, access their tax details 24/7, calculate their tax liability, claim repayments, make payments by laser card etc.
If you want to file your returns on line then you will need to register with the ROS beforehand. This process will take about 8 days so get started immediately if you have not done so already.
Once you file your return on line you will get an acknowledgement of them having received it and an immediate and accurate calculation of your tax liability. Within a few days you will also get a "Notice of Assignment" which shows your total tax liability.
Remember you have to pay your tax in a lump sum on the 31st October if paper filing or November the 16th if filing on line.
There are many thousands of businesses and self employed people who will find it difficult to pay their bill on time this year. The Revenue will be flexible with people particularly those who are unable to pay their bill in full for the first time ever. The Revenue might come to an agreement to put in place an instalment arrangement where you pay back every month or quarter. If you need this to happen then you will need to file before the October 31st deadline to get this arrangement in place.
Once you have made your return and paid your taxes you will then get a Tax Clearance Certificate which is written confirmation from the Revenue that your tax affairs are up to date. The requirement to produce a tax clearance certificate is extremely important as you will not be able to borrow money, seek state money for grants or obtain licenses if you can't produce this certificate so get moving with that return.
5 Top Tax Tips for the last minute tax dash!
. Register online immediately or get accountant to register as your agent
. Make your accountant's job easy- do not go in with a shoebox full of receipts. If you do, the return will most definitely be late. Check with the accountant how best to do it- should you do an income & expenditure sheet?
. Categorise receipts- bunch your receipts by category, such as property, medical, travel etc
. Consider paying late surcharge rather than filing a hasty return. The late fee for a return made up to two months after the deadline is 5%. It may be worth considering rather than making mistakes in haste.
. Whatever you do- make the return! Don't just ignore it as you don't have the finance to pay what you owe. Make contact with the revenue and put an instalment agreement in place that will allow you to pay what you owe in increments. Not filing a return will not benefit you in the long-term. You will need a tax clearance cert and you don't get this without making the return.
. Submit your P21 or balancing statements for the past four years to double check that you have paid the right amount of tax. Make sure you claim for what you are entitled to!
1. 465,348 people filed tax returns in 2008
2. 14.5% of these were late
4. 9.2% of returns were filed on deadline day last year
5. Almost 2,000 people called revenue helpline on deadline day