In the race to get tax returns in, many people overlook obvious and substantial reliefs, says James Fitzsimons
If you are rich, you can choose how much tax to pay. The middle classes can afford whatever tax the Government imposes on them. The €100 household charge won't break the bank. It's better than a 50 per cent or 60 per cent rate of income tax. Middle-income and lower-paid workers will struggle to cope with the unfair taxes imposed to help foreign banks and unscrupulous developers cover their losses. But in spite of all our complaining about higher taxes, many people are paying more than they should.
When the Revenue doesn't collect enough tax from old age pensioners, it hits the headlines, but we don't hear so much about the countless millions of unclaimed tax relief for PAYE workers in particular. Ireland is one of the easiest places in the world to pay tax and it is also one of the easiest places to get it back. All it takes is a little effort, and the confidence that you know what you are doing.
If you are self-employed the system forces you to file tax returns and you should be getting what you are entitled to. But that doesn't mean you are. In the rat race to get your tax returns in on time, many overlook the obvious. For PAYE workers, the probability of overpaying tax is much higher, due to unclaimed entitlements.
In recent times many of the Mickey Mouse tax credits such as service charges and trade union subscriptions were abolished. But many substantial reliefs still exist which people don't claim, or didn't think they could claim. I come across cases of it all the time.
Take the Home Carers credit. This year it is worth €810 annually in cash. It was the same in 2011. From 2008 to 2010 it was €900. Recently I came across a back-to-work story with a silver lining. When a wife, who had been working in the home, looking after the children and doing all those other thankless unpaid jobs, returned to the workforce, the tax office pointed out they had not claimed for the Home Carers credit.
The Revenue Commissioners immediately refunded €3,510. You can only look back four years. They lost out on nearly €6,000 that was theirs for the asking, but they didn't claim on time. And they really could have used the money. There are many more like them for whom the penny hasn't dropped yet. They could even keep the credit in 2012 if their combined taxable income was below €41,800. In recent years civil partners qualify, too.
This is just one example, but there are many other reasons why you might be due back tax. If you are looking for the annual €80 back for service charge payments and you cannot find the 52 receipts to justify it, you might give up. It's a lot of effort for a small payback. You've probably paid hundreds, if not thousands, of euro for doctor visits and health expenses but you don't know where the receipts are. Even if you could find them, you don't know what to do and it might cost more to get back the tax. So you leave it.
Those who put so much energy into resisting the €100 Household Charge, which we all know is unfair, would probably get a lot more back from the tax office if they claimed their entitlements. Sometimes all it takes is a phone call. PAYE workers don't even need to file a tax return. You can control your taxes and refunds with the Revenue's online system 'PAYE Anytime'.
A typical family could easily pay €500 to €1,000 in routine health expenses annually. That is worth €100 to €200 in tax you can get back. For the current year and the four years for which you can make a claim, you could get back €500 to €1,000 and maybe a whole lot more. You don't even need a financial adviser. You can do it yourself online. You could file a paper return. A phone call might be enough.
We spend millions on health expenses every year for which we don't claim back tax. Even expenses that arise abroad qualify for relief and this surprises a lot of people. While routine dental expenses don't qualify, many expensive procedures that are common today do justify a refund. They include provision of braces, bridges and crowns. Tax rebates can run into thousands. If you have the work carried out abroad it can qualify too. You don't get relief for glasses or contact lenses, but laser eye treatment is allowed. You can claim relief for health expenses if you pay the expense. They don't even have to be for your dependents.
Tuition fees qualify for tax relief. Since 2007, they are not restricted to family members. Registration fees don't qualify and while the first €2,250 is not allowed, fees for second and third children would qualify in full. If you pay such fees, make sure you know what you are entitled to claim. Apart from third-level courses, tuition fees for approved information technology and foreign language courses also qualify for relief.
I've only mentioned some things that people overlook. There is an abundance of information on the Revenue's website, but if you lived to be 100, you wouldn't get through it. Sometimes it's easier to take independent advice, and that should cost no more than a visit to your GP. But most people can find out what they need to know by calling the tax office. The Revenue Commissioners won't give advice, but they'll tell you what you can claim and how to go about it.
Every year the Revenue publishes its own guide to tax relief. It is called IT1 and that is where to start if you want to look up what is available. But get your skates on. There are only 50 days until Christmas and a week after that to claim back what you are owed for 2008. That is the last year when tax relief was given at the marginal rate (41 per cent) for health expenses. You might be due back more than you think.
If everyone claimed what they were entitled to, it would wipe out anything the Government will get from the controversial property tax. But don't let that stop you. It would be great to get back €3,000 even if you find out that it could have been €10,000. Learn from someone else's mistakes and not your own.
Act now and you'll have the money for Christmas.
James Fitzsimons is an independent financial adviser specialising in tax and financial planning