Taxing issues: Ins and outs of the tax deadline
With the deadline for filing tax returns looming, the Irish Taxation Institute explains the ins and outs of the system and breaks down the different types of levies, writes Charlie Weston
Published 07/10/2010 | 05:00
IF you are self-employed or a PAYE (pay as you earn) worker who has some non-taxed income, like rent, you need to get your skates on.
That is because the deadline for filing your tax return for last year is fast approaching.
For those who choose to stick with the old paper-based system, the deadline for filing your tax return falls on a Sunday -- October 31.
If you use the Revenue's online service (ROS) you can avail of an extended deadline of Tuesday, November 16.
By the deadline you must file your tax return for 2009, the Irish Taxation Institute (ITI) explained.
You must also pay any balance of tax due for 2009.
Also required is that you make a preliminary payment of income tax due for 2010. You will also need to file details of any capital gains arising in 2009.
Your preliminary income tax payment for 2010 can be based on:
- 90pc of your tax liability for 2010;
- 100pc of your liability for 2009;
- 105pc of your liability for 2008 where you pay by direct debit.
Given that a taxpayer's income may have fallen over the last number of years, many may seek to base their liability on 2010 figures, the ITI said.
Even if your primary source of income is employment income on which PAYE is deducted you must declare any other income you have received and calculate and pay the tax due.
This applies on everything from rental profits and investment income to maintenance payments from a former spouse.
In 2009 over 530,000 income tax returns were filed. Three- quarters of these were filed through ROS. However, this year is different, for a number of reasons.
The controversial income levy was introduced in 2009, and applies to all income.
Rates vary between 1.67pc and 5pc depending on your level of income.
This is payable in addition to PRSI (pay related social welfare), health levy and income tax.
For those in receipt of employment income, the income levy will have been deducted from your salary through the payroll.
But for those with self-employed, or untaxed income in addition to PAYE income, the income levy is applied to gross income.
Also worth watching, according to the ITI, is the fact that relief for medical expenses you incur is no longer available at your marginal rate of tax, i.e. 41pc for top rate taxpayers.
For 2009, relief is only available at the standard rate of tax, i.e. 20pc.
This year's pay and file deadline could be difficult for many for non-tax reasons also.
Changes in individuals' circumstances such as redundancy and pay cuts are also set to hit hard.
Unemployment has surged to 449,600, with a 27pc rise in joblessness among the professional classes.
And it is increasingly difficult to access credit so there may be difficulty in borrowing to pay a tax liability.
This year's tax deadline will have a particular impact on people who have rental property.
Those who own a second property will have recently paid the €200 non-principal private residence charge (NPPR).
This is not tax deductible when calculating your tax liability on the rent, according to the ITI.
Previously taxpayers were able to obtain a 100pc deduction for mortgage interest on the loans to purchase, improve or repair a rental property.
From April 7, 2009, only 75pc of the interest is tax deductible.
Worth noting too is the fact that the income levy is payable on your gross rental income.
So, if you have rental losses forward you cannot use them to reduce the income liable to the income levy.
Also, capital allowances on wear and tear of fixtures and fittings can be claimed as an expense in calculating your income tax liability.
Allowances are not deductible in calculating your income levy liability.
If you have invested in certain tax-based property schemes (for example, urban/rural renewal) you may be subject to restrictions on the tax relief you can claim.
This can increase the tax payable on your rental income by 10pc.
Unable to pay
If you cannot pay your tax liability in full on time there may be a possibility of making an arrangement with the Revenue to pay your tax liability in instalments.
If you are having difficulties paying it is important to contact the Revenue in good time, the ITI advises.
It is better to adopt an early and up-front approach to the issue rather than ignore the problem altogether.
Interest rates of 8pc a year apply on underpayments and late payment and a surcharge of 5pc or 10pc can apply if you don't file on time.If your primary