Tax return for Taxi driver

mikebro

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 .

Mr. Incognito

No records?

Do they not have a machine that gives receipts now- surely that keeps a track of journeys.

Cowboys.

Baby4

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LouOB

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

Mr. Incognito

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.

Baby4

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MonsterMob

LouOB wrote: »

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

are you being serious!?

Spook_ie

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

Mr. Incognito

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..

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.

Please excuse me if this is a simplistic view as I am only a taxi driver and personaly I would rather use ROS

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.

Spook_ie

SetantaL wrote: »

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.

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

Kinetic^

Spook_ie wrote: »

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?

Mr. Incognito

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

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.

Spook_ie

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 )

Kinetic^

Spook_ie wrote: »

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?

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.

Spook_ie wrote: »

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 )

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?

Baby4

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kluivert

Assuming the taxi driver is a self employed sole trader then there is no liability to the accountant in preparing his or her tax return or accounts for that matter.

The sole responsibility lies in case with the client.

For a client like this there would be a paragraph at the bottom of the profit and loss account and balance sheet stating that these accounts have been prepared based on the books, records and explainations kept by the propertior.

I prepare an IT return for a farmer every year, he doesnt keep the best records, but its not rocket science.

I get the details of sales from other sources.

For a Taxi Driver do the following.

Prepare a bank reconciliation - get statements from bank.

For Lodgements take as per Bank Statement as Sales. Up Drawings to an average that meets their circumstances and post this to Sales.

IE 40 year old married man with two teenage children - drawings should be about around say 30k a year. or 576e a week.

roy123456789

I guess some things can be taken for granted

Income is whatever the driver tells you he earns, there is no real record (vehicle milage / Meter records give an indication) same for all Taxi Drivers

Fuel is based on Milage /income for example to earn €100 a driver would average €10 in fuel (this would change depending on car)
Revenue realise it's easy enough to come up with as many fuel receipts as you'd need (friends etcand use this calculation instead)

It would be acceptable to allow tyre change per 25,000 km and a service per 10,000 km

Insurance is normally paid monthly and so can be checked that way or by ringing the broker

Receipt roll, first aid kit, torch cards are misc purchases and can be estimated

Depreciation of 40% per year is allowable on the Car

So you see, you can do a reasonable set of accounts without a single receipt

prinz

kluivert wrote: »

Assuming the taxi driver is a self employed sole trader then there is no liability to the accountant in preparing his or her tax return or accounts for that matter.
The sole responsibility lies in case with the client.
For a client like this there would be a paragraph at the bottom of the profit and loss account and balance sheet stating that these accounts have been prepared based on the books, records and explainations kept by the propertior. I prepare an IT return for a farmer every year, he doesnt keep the best records, but its not rocket science..

+1. Have done plenty of I&E accounts for IT purposes for taxi drivers. We would take lodgements (less any that can be explained as income from another source) + all expenditure, both recorded (repairs, insurance, license, radio fee etc ) AND an estimate charge for mobile phone, fuel to be gross sales for the year. Work backwards from the bank.

Simple footnote, 'this p&l has been prepared using info provided by the client yadda yadda, and we accept no responsibility for errors, omissions etc.' If revenue has a problem, and did come back in one case, we pass revenue on to client and let them sort it out between themselves, nothing to do with us.

Edit:- that said it would not be a recurring thing, perhaps a once off for a new client, but after that clients would have to start keeping records, cash book, etc.