Question: Who needs to file a tax return?

Answer: According to the Irish Taxation Institute, self-employed persons carrying on their own businesses (including farmers, publicans, solicitors and shopkeepers) are obliged to file a tax return, as well as persons in receipt of income where some or all of the tax on that income cannot be collected through the PAYE system.

Others required to file a tax return include those who opened a foreign bank account, invested in an offshore fund/offshore life policy, are a director of a company or realised capital gains.

In addition to persons who are obliged to file a tax return, there will be many others who need to file a tax return in order to claim the benefit of reliefs that they are entitled to. Examples include: persons who incurred medical expenses, persons who reside in private rented accommodation, persons who paid fees for their children in respect of third-level education and persons who made pension contributions outside of payroll.

Question: Why file a tax return?

Answer: Firstly, if the individual is entitled to tax relief in respect of any item, then the individual should claim the relief, thereby reducing their tax liability and increasing their after-tax income. Taxpayers are entitled to pay only that amount of tax that they are legally obliged to pay. Therefore, it is imperative that where an entitlement to tax relief exists that the relevant relief be obtained.

In the case of individuals who are obliged to file a tax return, the early filing of the return is essential in order to avoid the imposition of a surcharge by Revenue, and the possibility of a court appearance, legal costs and a penalty.

The filing of a tax return on time provides for ease of mind and a healthier financial position.

Question: What are the main tax return forms used by individuals?

Answer: There are five forms primarily used by individuals for tax return purposes.

Form 11: This form is used by self-employed individuals, persons who opened a foreign bank account, or who invested in an offshore fund/ life policy.

This form has become significantly more complex in recent years, with the current version running to 22 pages.

Form 12: This form is used by employees and pensioners who are either returning income received outside the PAYE system, for example rental income, or capital gains, or who are making a claim for relief.

Form 54: This form is designed for use by individuals who are completely exempt from tax, by virtue of having very low income, but who have suffered a deduction of tax at source on some income, for example, dividend withholding tax. The form is used to claim a refund.

Form Med1: Details of medical expenses incurred are entered on this form in order to claim the appropriate relief.

Form Rent1: This form is used by an individual who is renting private accommodation in order to claim the appropriate relief. The landlord must countersign this form to confirm that the individual is paying this rent.

Question: Explain the process of filing a tax return on paper.

Answer:

1. Determine what form(s) apply to you.

2. Go through the form(s) line by line and identify the sections that are relevant to you.

3. Gather the relevant data, for example P60, dividend vouchers, bank interest statements, etc.

4. Complete and sign the form.

5. Double check the return before submission to Revenue.

Where an individual is familiar with form-filling and financial information, or where the number of entries is low, a DIY approach might be appropriate, according to the ITI.

However, where the return is more complex, for instance where the individual has a business or has been buying and selling shares with capital gains issues arising, it might be more appropriate to hire an advisor to prepare the tax return.

The time to commence gathering the information and passing it on to advisors is now, as difficulties can arise in obtaining information, which in turn can lead to deadlines being broken and surcharges arising.

Question: I am being posted by my employer to a subsidiary company in Germany for two years. I know the Social Security payments in Germany are expensive. How will this impact on my PRSI contributions?

Answer: Under EU Regulation 1408/71 (Article 13), a person is insurable for Social Insurance purposes in one EU Member State only. An employee who is posted from Ireland to work in another EU state may be entitled to apply for an E101 Certificate under the above EU Regulation. This Certificate would exempt you and your employer from paying Social Insurance in the country where the work takes place and keeps you covered under the Irish system. This means that your rights to Irish Social Insurance benefits are being preserved while you are temporarily working abroad. An E101 Certificate is valid for any period up to 12 months, but in certain circumstances it is possible to extend this period, normally up to five years.

Question: I am a medical card holder. Do I still need to make a health contribution?

Answer: No. An individual who has full eligibility for services under Section 45 of the Health Act 1970 or Council Regulation number 1408/71 is exempt from health contributions (medical card holders).

Also those who hold survivors’ pensions, widows’ (non-contributory) pensions, deserted wife’s pensions/ benefits, death benefit, one-parent family allowance and corresponding pensions from an EU member state are also exempt.

Question: My employer offered me the opportunity to participate in a share incentive scheme and I was awarded shares with a value of €1,000. Will I have to pay PRSI on these?

Answer: No. Employees share incentive schemes can save the employees (subject to the income tax ceiling) up to 6% in PRSI. This ceiling may be removed in future years making share incentive schemes even more attractive to the employee.

Question: What does my PRSI contribution comprise of?

Answer: The PRSI contribution is made up of Social Insurance and the Health Contribution. The Social Insurance element goes to the Social Insurance Fund, which helps pay for Social Welfare benefits and pensions. This element is paid by employers and employees. The Health Contribution goes to the Department of Health and Children to help fund the health services.

Question: What if my weekly pay fluctuates above and below €480 but my annual figure is still not more than €24,960?

Answer: Where an employee’s weekly pay fluctuates above and below €480, but the annual pay during 2007 is not more than €24,960, you may claim a refund of the 2% Health Contribution or where an employee’s weekly pay fluctuates above and below €1,925, but the annual pay during 2007 is not more than €100,100, an employee may claim a refund of the 0.5% Health Contribution deduction.

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