Filing proper returns doesn’t need to be a taxing job

THOUSANDS of people are penalised by the Revenue each year for failure to comply with tax return requirements but we would “guestimate” that at least 20% of these people are unaware of their tax obligations and that many of the penalties incurred are very much avoidable.

Many people, if they are in PAYE employment, believe the October 31 deadline does not apply to them. However, this is not always the case. There are a variety of people, from those owning buy-to-let properties to those who have a foreign pension or those who have recently sold shares, who need to file a tax return to be tax compliant.

For this reason, we have put together a checklist of the most common situations we have come across where people have to file a tax return outside of self-employed individuals.

The taxback.com tax-file checklist is as follows:

* People with dividends from equities in Ireland or abroad.

* People with domestic property rental income (commercial or residential).

* People who receive income under the Rent-A-Room relief or from the provision of childcare services.

* People who have generated a return from the sales of equities, property or investments.

* People with foreign property rental income.

* People with foreign pensions.

* Director of a company in Ireland.

* An artist with creative income who wishes to avail of the Artist’s Exemption.

* Retiring professional sportsperson who wishes to claim Sportsperson’s Relief.

Landlords, in particular, are a large grouping in this country (145,021 landlords registered with the PRTB in 2010) and, whether they have one house or 20, all have to file a 2010 tax return by October 31.

Our experience is that many landlords are surprised at the reduction in the tax bill once all related expenses have been utilised. We file rental income tax returns and endeavour to reduce the tax liability of landlords in a tax compliant manner through deductible related costs such as property management fees; interest on mortgage; maintenance fees; wear and tear; insurance payments; etc.

In addition to landlords another very large grouping that needs to be cognisant of this tax deadline are those in the construction industry/trades professions.

In August, there were 469,713 people on the live register. Of this sobering number, some 185,000 previously worked in construction, the trades or in manufacturing as operatives.

A consequence of the recession has meant that thousands of tradesmen and women in the construction industry who were laid off over the past three years now have had to go it alone in terms of employment, ie, set up as self-employed contractors.

Many of these people are now under pressure to file their own tax return for the first time. We would urge those newly self-employed construction workers to ensure their tax return is accurate, compliant and accounts for all work-related expenses for which they can to claim relief.

Some of the main expenses which self-employed tradesmen and women are entitled to utilise in their tax return include petrol for work-related travel, insurance, light and heat and capital allowances.

There is no limit set in respect of the allowable deduction, ie, if a self-employed construction worker incurs expenses in relation to business related mileage, etc, these items may be deducted in full from the receipts in order to determine the taxable amount of income. If the expenses are greater than the receipts, he has a loss which he can offset against future profits.

Finally, we would strongly advise that anyone who carries out “nixers” outside of, or instead of, their PAYE employment to be tax compliant, as the Revenue are coming down hard on those who try to hide earnings and more often than not, if the tax return is filed accurately, there may only be a relatively small tax bill to be paid — a lot smaller than the penalties for non-compliance.

Revenue has the power to impose a broad range of penalties ranging from a surcharge for late submission of a return which may be 5% or 10% of an individual’s tax liability depending on how late the return is, to specific penalties for failure to file a return or provide data on request.

Penalties for filing a return negligently or fraudulently can be severe as they are based upon the difference between the actual tax liability and the amount paid. Furthermore, interest on late payments of tax accrues on a daily basis and can result in huge tax bills.

Darren Byrne is a tax specialist with taxback.com