What's holding up my tax relief on medical expenses?
Published 23/03/2014 | 02:30
Q: I'm in a full-time job and recently bought an investment property, which I'm now renting out. I have registered with the Revenue Commissioners as a landlord – but I have yet to file my first tax return for the rental income earned on the property, as it is not due until later this year. I tried to claim tax relief on last year's medical expenses at the start of the year – but for the first time ever, my claim did not go through. Why is this? And how do I get around it?
Barbara, Ennis, Co Clare
AThere may be a number of reasons why your claim has not been processed.
I am assuming from the query that you registered with the PRTB as a landlord, registered for income tax with the Revenue and tried to claim your medical expenses through PAYE Anytime.
The most common reason a claim for health expenses is held up is that your record for the year in question on PAYE Anytime is locked. This can happen for a number of reasons. If you were in receipt of Department of Social Protection income during the year, Revenue may be awaiting final details on this from the department, and it may have locked your account in the interim. This will unlock automatically once it receives the information. Revenue may also have locked your account if it believes a tax return is outstanding. In some cases, it will simply be an error. In each case, you should call Revenue to find out why your account was locked.
There are a number of potential "work-arounds" in the meantime. If outstanding information from the Department of Social Protection is preventing you from putting a claim through, contacting Revenue may "unlock" your account. If an outstanding tax return is holding up your claim, you can submit your tax return for 2013 now.
QI have a steady job in IT – but I'm growing increasingly envious of friends of mine who are working as IT contractors and earning a fortune. If I give up my full-time job to be a contractor, are there any financial pitfalls that I should be aware of?
Gary, Swords, Co Dublin
AWhile it may seem like contractors' earnings are far in excess of those in PAYE employment, the decision to become a contractor should not be taken lightly.
It is often true that hourly rates for contractors are higher but you should be aware of the reasons for this. Job security is high on this list – contractors are often engaged on a short-term basis so their higher wages may be needed to cover "down time" between jobs. In addition, a contractor may incur a higher level of work-related expenses. Contractors may work longer hours and while this can increase your gross wage, it may impact on leisure time.
From a financial point of view, there are two major pitfalls to be aware of.
Firstly, being paid gross, as opposed to net, is one of the biggest differences between PAYE employment and contracting. As a PAYE worker, your boss makes all the necessary deductions for tax, PRSI, etc. If you are a self-employed contractor, it is you who must ensure that adequate provisions for tax are made.
Secondly, ensure that anything you write off against tax qualifies as a legitimate business expense. Revenue has recently clamped down on contractors' expenses. If you are in any doubt about the legitimacy of a deduction, seek expert advice.
Barry Flanagan is a chartered tax consultant with contractors.ie.
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