Hi , I have just been asked to do a Income tax return for a taxi driver , no records , I was just wondering what mark up to use i.e. fuel to sales . Thanks for any help you can give as I am not familiar with these returns .
Do they not have a machine that gives receipts now- surely that keeps a track of journeys.
Personally, if they have no records, I'd be very wary about doing their accounts. If they were audited by Revenue, you would have to show how you came up with the figures, based on only fuel expenses.
You could try looking up the National Taxi regulator webpage, and look to see what the fares are. You can then get something in writing from your client, stating how much mileage he did in a each month. (He MUST have some idea). There is a standard taxi charge per mile, so you can work it out that way.
As SetantaL said- they are supposed to turn on the meter every time they take a passenger. If he didn't do this, and hence keep records- I'm sure there will be consequences for him.
I wouldn't touch his accounts, if I were you.
Just my 2 cents.
ffs - all cash he has spent during the year = sales
avg amount on petrol per week - purchases
car parts/ car check - purchases
etc etc etc
taxi 'people' dont keep receipts
everything they get they need to spend i.e. mortgage, loans, weekly shopping, bills, holidays etc this is all the money they earned during the year other than loans
I've read that a few times and it makes less and less sense each time.
Cash he has spent is sales?
Everything they get they need to spend and this is their money earned?
The point we are trying to make here Lou, relates to fares. i.e professional income. It's easy enough to spend money and you don't have to track it. You do however have to track income and in particular professional income as this is TAXABLE income.
You cannot just pluck a magic number and say- here tax that. Revenue will insist on seeing records supporting the return and as a tax advisor you will be oblidged to provide your computation that you have, as a professional advisor, signed off on. If it's wrong you're professionally liable. You cannot make a best guess of it. Personally, if the driver has NO records, zilch, nada of income. No record of fares? At all? with a legislated receipt machine sitting beside him that they were moaning about having to pay for in the first place. I wouldn't touch his tax return.
Does he work for a taxi company that allocates fares- surely they have records of fares.
Lou-- not keeping receipts is inexcusable in Revenue's eyes, and SCREAMS tax-evasion. And it's totally ridiculous to say that everything a person spends is their income. Have you considered profit???
Surely if you are doing an IT return this has nothing to do with the clients accounts, if the client says he earned nothing and spent €10000 then you are just filling in the boxes with the details provided by the client, however, if you are doing their accounts then that is a different matter altogether..
Please excuse me if this is a simplistic view as I am only a taxi driver and personaly I would rather use ROS
Same point. What do you base the return on? What the client says? Not good enough. What you spent is not what you earned. Although you can be sure when Revenue decide to audit you they will look at what your declared income is verses your assets.
You have to have a record, on file of how the return was calculated. "ah sure, bout 25K" doesn't cut the mustard. There is always a paper trail unless you deal drugs for a living.
No problem there. But when you use ROS what do you base your income on? what you spent? how do you record that? When you go into the shop to buy smokes? If someone hands you a tenner for a fare and you spend it on two pints down the pub how do you keep a record of that exactly?
Revenue have a habit of visiting sectors, especially where cash is trading hands. The have audited pubs and hairdressers for example in the last few years. Taxi drivers are going to be high up on that list to be audited within the next few years. If you don't have something concrete to show Revenue when they come knocking, well, look up the daily rate of interest and go figure it out. One of the things about auditing an industry like this is that they can pretty quickly fgure out the average earnings for a taxi driver in a particular place over a particular period. If you have substantially less declared than Joe down the road with a plate, revenue have the power to raise and assessment of deemed earnings.
Surely as I said if you are doing a tax return, you fill in the boxes with what ever the client tells you, if you are preparing a set of accounts then you need receipts etc. as a non accountant they would seem to be two totaly different things
Seriously, you need backup to what you put into a tax form just as you do a set of accounts. If there's no backup then it doesn't get put into the tax form. That's how I work with anyone that I do income tax returns and it would've been the same in work. How can you actually say that it's ok to do that?
This is an interesting logic on a Monday morning.
So what you're saying is for the form that declares your income to the government and you pay a levy based on your earnings- this you can prepare based on whatever the client invents, who 99.9% of the time has no idea what is taxable and what is not (heck what are they paying you for) BUT your own set of internal accounts must be based accurately on actual receipts.
Leaving aside the contidictions in that, lets say the second part of your sentence is correct, then we can logically prepare the tax return on these accounts, right?
Except the taxi driver in the example has no accounts, does he? Whoops.
You all seem to be getting very uppity, when as a potential client I am asking straight foreward questions...
If I give you a set of figures and ask you to fill in a tax return is that the same as asking you to compile a set of accounts? My view is no, accounts are accounts, tax returns are tax returns, perhaps someone would like to get off their accountancy highhorse and explain to me ( as a potential customer ) what is the difference/similarity between a set of accounts and a tax return?
The OP is being asked for help in filling out a tax return, he's not (as far as the post goes ) being asked to fill out a set of accounts.
Now if I recall a tax return is basicly...
Total Income minus Allowable expenses multiplied by the tax rate
Accounts would be
Total Income minus Allowable Documented Expenses
Two totaly different things ( or am I being to simplistic for you )
Tax returns are seperate to accounts, yes. However, the tax return can sometimes be based off the accounts if the same accountant has carried them out as they will have the back up there with them. If not, then the taxi driver, would have to provide proof of income earned and expenses incurred. Otherwise he could just pick any figure out of his head for income/expenditure which could be deemed as tax evasion.
You still need back up for both accounts and tax returns. It's not optional. If you get audited and your accountant just shows some piece of paper with no backup then he's in the dole queue the next week as they have not carried out their job properly. You, as the tax payer, also need to hold on to those records for several years, 6 years plus current year if I'm not mistaken(it might be 7 + current). It's about backup and traceability - if there is none for a figure(s) then said denomination(s) don't get put on the tax return. It's about covering your back, as the client, as much as it is our own. The last thing you want is a revenue audit with no backup, you'll get laughed at and then get a nice tax bill with interest and penalties attached.
When choosing an accountant, you would usually ask around, see if he's ok. Well the accountant has to do the same and more due to money laundering regulations. We have to ring prior accountant(s) and find out if there's any reason why we shouldn't take the job on and there's a few other things. If any of them are out of place then the client won't be taken on. It may seem harsh but why would an accountant take on a bogey client that might jeopardise their establishment?
The figures you come up with (through preparing accounts) are the ones that are generally used to input into a tax return.
As an accountant, I would not be comfortable in preparing a set of accounts purely based on what a client 'tells' me. This is because if Revenue come knocking-- they will want backup figures, either from me, OR my client, to say where the figures in the accounts (AND tax return) have come from.
Say- the Revenue are not happy with the accuracy/trueness of the figures, and they compute penalties of €10,000 on my client. The client will not be happy with me- as I have prepared the accounts and tax return. They may seek for me to pay some of those penalties, as I, their accountant, should have advised them that keeping receipts is crucial.
Basically-- what we have advised the OP, is not to take on this tax-return-- as with both a tax-return & set of accounts-- an accountant must be sure that the figures represent a 'true & fair view' of the client's financial circumstances & performance over a specified time period.
Hope I'm not being too 'uppity', and my 'new potential client' understands...