This is your ultimate one page cheat sheet with regard to making your income tax return this year.

My name is Liam Burns and I am a chartered tax adviser and accountant and am open for business. Hit the button below if you want to get in touch.

Submission Dates & Deadlines

As most of you are aware the deadline for 2019 income tax returns is 31 October 2020.

For online payments via ROS this is extended to 10 December 2020 but important point is that it is only extended for those who comply with the conditions of paying income tax AND Preliminary Tax in FULL and online via ROS.

For taxpayers who file their Income Tax Return and make the appropriate payment online in respect of Preliminary Tax for 2020 and any Income Tax balance due for 2019, the due date is now further extended to Thursday, 10 December 2020.

In order to qualify for the extension, customers must both pay and file through ROS, otherwise the relevant return and payment is due no later than 31 October 2020.

POSITIVE NEWS!
BUDGET 2021…Debt Warehousing for this tax return liability

It has been announced in the Budget that tax debt warehousing will be available for relevant individuals and include balance of income tax 2019 and Preliminary tax 2020.

This means that tax payment can be deferred by one year with interest of 3% applicable after a year, and no surcharge for late payment.

This is a positive measure giving relief to those whose profits and income have declined since covid 19 hit our shores.

We await details of the criteria to qualify as a ‘relevant’ individual.

What is Preliminary Tax?

Why do we have to pay Preliminary Tax? Why are we paying tax for next year?

(This is the usual element that frustrates tax payers and our clients!)

We are now in 2020. The income tax deadline relates to 2019 accounts and tax returns. So, as most know, the balance of any tax for 2019 is due for payment in the coming weeks.

Preliminary Tax for 2020 is also due for payment in 2020. It is effectively an estimate of the actual liability for 2020 – which is now almost over.

If you were a PAYE Worker, you pay your tax as the income is earned – so it appears Revenue see it as appropriate that self-employed individuals, pay an estimate of their 2020 tax in 2020.

The most commonly used estimate is the amount based on 100% of the actual liability for 2019 (i,e, the preceeding year).

The other option is to use 90% of the actual liability to calculate Preliminary Tax.

If a taxpayer knows that profits are significantly lower than previous year, then using the ‘100% rule’ will create an overpayment in tax.

This would be common if there were changes in individuals’ business in 2020 compared with 2019, resulting in lower taxable profits. In 2020 due to Covid 19, this is becoming very common, due to unforeseen business closures during the year. Therefore for 2020, the 90% rule will be utilised more commonly.

105% of 2018 tax liability can be used as estimate too – if paying by direct debit and liability was not Nil.

Pay Local Property Tax before submitting your return

Make sure this is paid up to date before you submit your tax return. If not Revenue will implement an automatic surcharge on your total income tax liability of up to 10% – which could be far greater than the LPT cost. The LPT would still need to be paid.

Most common scenarios whereby a person would be obliged to file a tax return

Tax return tips for these individual types

Individuals that have non-PAYE earnings

(e.g. a side job and earning >€5,000 outside of PAYE/Employment income)

• If >€5,000 then you need to register for income tax and file Form 11. This can be done by registering for ROS, at www.revenue.ie

• If <€5,000, then you need to file form 12 – this can be done through MyAccount in the PAYE Anytime system.

• You will need to include all your income – PAYE, social welfare (if any) and other income in the tax return. If done online, generally the PAYE income is prepopulated.

• You can include all tax credits – Personal Tax Credit, PAYE Tax Credit, Earned income tax credit and any other relevant credits that may apply to specific individuals.

• Most common additional credits will be Health Expenses, Tuition fees, Home Carer Credit and single person child credit

Builders/Construction contractors under the RCT System

• Details of income and Expenses (Accounts extract) should be included on a Form 11 income tax return.

• You should be able to get the information from sales from the RCT records on the Revenue System. This shows your income earned and paid under the RCT system, as a contractor.

• RCT deducted – if any – is normally prompted on the online form 11. You may need to write to Revenue via MyEnquiries in order to have the RCT offset against income tax or refunded, if applicable.

• If you had other sales – say for private work, then this will not be on the Revenue system and should be added to your overall sales for the year.

• Normal expense would be allowable against the income – for example

• Motor / Travel Expenses

• Subsistence Expenses (subject to Revenue Guidelines)

• Expenses for Tools, materials used for work

• Business Insurance

• Stationery / Office type expenses /Computer Cost

• Accountants / Tax adviser Fees

• Phone / Internet – if used for work purposes

• Bank Fees/charges

• Capital Allowances – i.e. 12.5% of cost of vehicle – if used for work.

• Might be worthwhile considering pension options (as per below).

• If profits in excess of the standard rates of tax (i.e. if paying tax at approx 50% levels) then it might be worth considering changing the structure to a limited company.

Directors of Limited Companies

• If you own >15% of the share of a limited company then you are obliged to file be registered for Income Tax Form 11and file and tax return each year.

• If you had taken a salary from the business with no additional bonuses’ after the year end, and all of your credits were allocated to the company payroll correctly, then you generally will have a Nil liability.

• Salary/Wages generally prepopulated on Form 11 online form.

• If addition credits such as health expenses to claim – then you should have a refund.

• However, if any errors in credits / cut off rates or allocations etc. these will be picked up in your income tax return and you may have a balancing liability.

Landlords (Residential and/or Commercial Property)

• Details of Rental income and expenses to be submitted on Form 11 – Rental Section.

• Rent amount is based on ‘receivable’ amount – I.e. if tenant in arrears, you are still taxable on the rental that should have been received.

• Ensure registered with PRTB (residential only) to avail of mortgage interest as an expense against rental income.

• Cannot claim total capital repayments to bank as an expense- only Interest.

• Mortgage interest relief back to 100%

• If property in two names (self and spouse) – splitting rent equally in tax return may utilise tax rates and credits more efficiently.

• Ensure that items are classed appropriately – i.e.  repairs are deductible in the year, while costs of capital items (renewals e.g. white goods, carpets, furniture, replacement of boiler/windows) are allocated over 8 years (capital allowances).

• Utilise capital allowances from items in previous years – and keep record to ensure you do not miss out on using capital allowances in future years.

• LPT is not an allowable deduction.

• Pre- Letting Expenses can be claimed – but only in certain circumstances – i.e. when property was vacant for 12 months – note the max expenses is €5,000.

• Might be worthwhile considering pension option mentioned further below.

>> Read more about Landlords’ taxation here

Non-Resident Landlords

• Tax returns due are similar to resident landlords – same filing dates and payment dates apply.

• You may have a credit for tax withheld from letting agent (or tenant) – should have a certificate of income deducted – form R185 – This will show the credit for tax withheld.

• If collection agent appointed – then there is not a requirement for deduction of rent above.

• General rental expenses allowable.

• Rents are subject to normal Income Tax rates and Universal Social Charge (USC).

• Tax credits will be restricted if landlord has foreign income.

Other Sole Trader types – including professional services

(e.g. solicitors, engineers, website designers, software engineers, architects, taxi drivers, beauticians, tattoo artists, truck drivers, couriers, etc)

Details of income and Expenses (Accounts extract) should be included on a Form 11 income tax return – under Self-Employed section. Normal expense would be allowable against the income – for example:

>> Read also about professional contractors’ taxation and tax-saving tips.

Individuals in receipt of ‘Other Income’

(e.g. dividends from shares, share options or foreign income)

• If >€5,000 then you need to register for income tax and file a Form 11. This can be done by registering for ROS.

• If< €5,000, then you need to file a form 12 – this can be done through MyAccount in the PAYE Anytime system.

• Use ‘Foreign income’ section, to input details of dividends received from outside Ireland.

• Use ‘Irish Income Other’ section to input details of Irish deposit interest, Irish dividends, maintenance payments, royalty payments or ‘other sources’ not taxed elsewhere.

• You will need to include all your income – PAYE, social welfare (if any) and other income in the tax return. If done online, generally the PAYE income is prepopulated.

• Ensure to include all tax credits – Personal Tax Credit, PAYE Tax Credit, Earned income tax credit and any other relevant credits that may apply to specific individuals.

• Most common additional credits will be Health Expenses, Tuition fees, Home Carer Credit and single person child credit.

Pension Planning Options to Reduce Tax

You may be able, subject to conditions and limits, to start a pension or make an additional contribution to your pension in order to reduce your income tax liability.

For example, if you contribute €10,000 to a pension, this could save you up to €4,000 in Income tax, and a create a possible further cashflow benefit of reducing your Preliminary tax payment by €4,000.

Best advice is to talk to your accountant or pension adviser further in relation to this.

>> Read more about pension planning to reduce income tax

Details you should have to hand to include on tax return

• Your PPS number
• Date of Birth
• Date of Marriage
• Nationality

Medical card holder? This will entitle you to lower rates of USC, for example.

Details of any deposit interest / dividend income

Medical Expenses – Total expenses less any amounts paid by insurance / compensation

Tuition fees – name of student / Full Time / Part Time Course – ensure it is an approved course  – also note that registration fees are not allowable.

Resident Status – Are you Resident / Ordinarily Resident /Domicile?

Resident if present for >183 days in year (Or 280 days over 2 years, With at least 30 days in each year)

Capital Acquisitions – If you received a gift or Inheritance in 2019, you need to specify this by ticking a box on the Form 11 for 2019. A separate from IT 38 should be submitted if not already done, in respect of this.

>> Read more about inheritance tax and capital acquisitions tax

CONTACT ME FOR TAX RETURN SERVICES

Liam Burns & Co is a specialist tax and accountancy practice  – Chartered Certified Accountants and Chartered Tax Advisers – offering professional services and advice for individuals required to submit their annual income tax returns.

Comprehensive Service (From €400 ex Vat)

• Preparation of Accounts and Tax return
• Submission of same to Revenue Commissioners
• Review of Notice of Assessment
• Advice in relation to tax credits, and other tax relief’s ensuring you maximise credits and reliefs.