Business Personal Finance

Wednesday 1 October 2014

Big Brother is watching your tax habits

Cathal Maxwell

Published 13/07/2014 | 00:00

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The Revenue Commissioners
The Revenue Commissioners

In the good old boom years, the Revenue Commissioners never really looked for tax from pay-as-you-earn (PAYE) workers.

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Times have changed and pennies are being counted. Over the last few weeks, the Revenue has started issuing requests for tax returns to 40,000 PAYE workers.

So what should you do if you receive one of these requests?

There are two options open to you. You can hire an accountant or tax adviser or you can deal directly with Revenue. It is important not to ignore the request. The Revenue never go away!

Revenue has found out that a lot of PAYE earners have other sources of income such as pensions, rental income, deposit interest, share dividends and part-time self-employment income.

Anyone earning non-PAYE income over €3,174 a year must file a tax return under Revenue's self-assessment system and it appears that Revenue is going to apply this rule more so than in past years.

So PAYE earners with say rental income or other non-PAYE income could find themselves penalised for not making their tax returns in time. In such cases, interest could be charged for the late payment of any extra tax owed.

Under self-assessment rules, tax is payable once a year in October and you must also send in your tax return at this time.

The use of technology has allowed Revenue to be more specific in who it targets.

For example, rental properties registered with the Private Residential Tenancies Board are being cross checked. So too are landlords receiving social welfare payments for rents. Remember banks have also to make returns of deposit interest paid.

Big Brother is watching us all and the Irish Revenue is one of the smartest tax authorities worldwide when it comes to using the latest technology for collecting taxes as well as targeting tax dodgers.

While it is important to pay the right tax, it is also important to claim any tax refunds which you are eligible for. There are millions of unclaimed tax refunds owed to people every year.

One of the most overlooked tax refunds is medical expenses. You can claim back a fifth of what you paid out for medical costs in tax relief. You can also claim back two-fifths of nursing home costs. Just keep all of your receipts to support your claim.

Another valuable tax allowance is the home carer's credit. This is worth €810 a year for one-income families where one spouse stays at home to mind the kids.

Most employees are eligible for a tax allowance for flat-rate expenses. These are expenses which are incurred when you perform your work duties. The tax allowance for such expenses generally range from about €30 to €700 a year, depending on your job.

Another tax refund which is often overlooked relates to medical insurance. Where medical insurance is paid by one's employer, a personal tax claim must be made to Revenue for a tax refund. This tax refund could be worth as much as €400 for a typical family (assuming the employer is paying €2,000 worth of medical insurance on behalf of the family).

Remember it's not too late to claim tax refunds for previous years as you can claim back tax for the last four years.

Cathal Maxwell is managing director of the online tax experts, paylesstax.ie

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