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Tax return filing season – A few basic tips!

In just less than one month the last day for filing your tax return form will be upon us. That is the 10th November so we just wanted to highlight a few important issues that may help a small bit to reduce the burden or to ensure that the burden doesn't become larger than it should be. There is no dark secret code in terms of what we are going to tell you and this advice is freely available from a number of channels but if it saves you a few bob, well then it has probably been worth the read. If you are all sorted already, congratulations, you have benefitted from the foresight of being well organised
File the return on time
If paying and filing on ROS you have until the 10th November. If filing a paper return or just filing a return and not paying then your date is the 31st October. If your return is filed late there is a 5% surcharge if filed within 2 months of the deadline and, if filed after 2 months, the surcharge is 10%. Assuming a tax bill of €20,000, that is an extra €1000 or €2000 … ouch! For company directors who own 15% or more of the company the position is even more serious as the surcharge is applied before taking account of the tax that you already paid on your salary. Take a company director (married with one income and 2 children) with a salary of €80,000 the surcharge could be €947 if filed within 2 months and double that to €1,894 if after 2 months. Also remember that the same tax deadline exists for your Gift/Inheritance Tax return and Capital Gains Tax return and similar surcharges apply to those taxes. If your return is late there is no point pleading with Revenue that the dog ate your accounts or other rubbish excuses! However there can be some leeway in the event of a genuine illness or family bereavement. Take no chances, engage as soon as possible with your accountant or tax adviser and get it done and paid on time.

Can additional contributions help? Yes but there is only limited scope in terms of additional pension payments or setting up a pension, if you don't already have one. If self –employed and you have a pension scheme it may be possible to make a top-up contribution before the due date of 31st October or 10th November and have that payment backdated into 2015. The amount of pension you can pay and get tax relief on depends on your taxable business profits less capital allowances and your age. So if you are a 35 year old female that has a trading profit of €45,000 and capital allowances of €2,000 your pensionable profit is €43,000. As a 35 year old you can contribute 20% of that figure (€8,600) to a pension and get tax relief on that. Please be aware of what tax rate you will get tax relief at – either 40% or 20% or a combination of the two rates. If the lady in question was single she would get tax relief on the €8,600 at 40% thereby saving her €3,440 in tax.The older one gets the higher the percentages that they can contribute to their pension but the key element is that tax relief is achieved at the higher tax rate. If getting tax relief at 20% and paying into a pension for your future then that is a good deal also. Employees in some pension schemes could also have the opportunity to make a top-up additional voluntary contribution [AVC] before the tax deadline and have that backdated into the prior tax year in the same way as a self-employed person. This could be useful if an employee had a tax bill arising from other income such as rental income or dividends. The key point again is that the AVC is paid and claimed on the tax return prior to the tax deadline.

Don't miss out on credits/reliefs
To ensure that your tax bill is kept to a minimum it is vitally important that you claim all the tax credits and reliefs that you are entitled to, based on your personal circumstances. Are you married or single?If married the tax credit is €3,300 and half that at €1,650 for a single person. If you are an employee in paid employment you would be entitled to a PAYE tax credit of up to €1,650 provided your income from that employment is €8,250 or more. If less than that amount, say €7,000, you would get a PAYE credit of 20% of that of €1,400. If you own 15% or more of a company and earn a salary from that company you are not entitled to the PAYE credit. Similarly a spouse of an owner director who earns a salary from the same company would not be entitled to a PAYE credit. If one spouse is working and the other is at home caring for children then there would be an entitlement to the home carers credit which is worth €810 for 2015 and has gone up since then. Please also make sure you claim all you medical expenses such as consultants, doctors, prescriptions and non-routine dental treatment. Tax relief is available at 20% for this, so a €3,000 spend on qualifying medical expenses would give you a tax credit of €600. If paying for nursing home bills the tax relief is at 40%, which given the high costs involved can be a significant saving. Other common credits missed out on can be college fees, especially relevant when you have more than one child in college and, medical insurance premiums when paid by your employer. For medical insurance premiums paid by an employer the maximum relief is €200 per adult and €100 per child, provided the cost of the premium is in excess of €1,000 per adult and €500 per child. So for 2 adults and 2 children, where the employer pays the full premium and the costs are in excess of the above figures, the tax relief would be €600. It is vital that the tax advisor fully understands the client's personal circumstances so that all credits can be claimed. There are many other credits available so it's important to be aware of these and communicate your circumstances to you advisor.

Preliminary Tax – 2016
We often hear this from clients…….. "so you are telling me that not only do I have to clear my 2015 tax liability but I also have to pay preliminary tax for 2016"! Unfortunately the answer to that is yes. Self-employed and other taxpayers who are in the self-assessment system are obliged to make a payment on account for the current tax year on or before the same deadline date as the payment to clear the 2015 tax liability. The preliminary tax payment can be calculated using a few different ways but for ease of explanation the most common is based on paying 100% of your final liability for the previous tax year. Therefore if your final tax liability for 2015 was €9,000 then you would be obliged to make a preliminary tax payment of €9,000 for 2016 also, giving a total bill of €18,000. If you had already paid preliminary tax for 2015 around this time last year, of say €8,000, then the final bill is reduced by that amount, thankfully! In this scenario your final tax bill for 2015 is €9,000 but you have already paid € 8,000 so the balance you owe is €1,000 for 2015 and €9,000 for 2016 so a total of €10,000. The clear message we give to our clients is that you clear the prior year's tax liability in full and pay what you can towards your preliminary tax for the current year depending on available funds. If you don't pay any preliminary tax for the current year or pay less than the required amount then Revenue can charge you interest but we haven't seen that being applied too much in recent years. However it is in their powers to do so. If your final tax liability for 2015 is reduced by a pension payment then this has the knock on effect of reducing the preliminary tax payment for the current tax year.


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