Unable to pay tax due - income down.

Builderfromhell

Hi all,
I employ 3 people full time and used to employ several more.
I pay PAYE, PRSI, VAT and income tax.
Business has rapidly gone from bad to worse and I am having great difficulty getting paid by several clients to the tune of about 100k.
What money and cash flow I have I need to keep projects going and staff employed.
Some contracts that were due to start later this year have been cancelled.
I emailed revenue explaining the situation in the hope that they would give me chance to recover.
Today I got my first warning letter for non payment of tax, but I expect more.

I don't have a specific question but would appreciate any advice or opinions.

Strange as it may seem I am confident my staff and I will sucedd, as we are good at what we do, but for now I have to let revenue wait or cease trading. I'm a sole trader.

dbran

Hi Buildrfromhell

I would say that the worst thing that you can do now is to ignore the letters from the revenue. Failure to file your returns will inevitably lead to the revenue raising estimates of the liabilities due and chasing these estimates plus interest. Eventually these liabilities will be passed to the revenue sheriff. You are also at a greater risk of revenue audit if you are late filing returns. I dont think the revenue respond very well to emails as they get them all the time.

Therefore I would suggest that if you have not filed the outstanding returns so far that you file them now. I also recommend that you file them for the correct amounts as you are probably at a higher risk of a revenue audit at this point.

Then you have two choices regarding payment.

You could contact revenue regarding entering into a revenue installment arrangement. Usually the maximum amount that they enter into is 2 years.The drawback of this is that they will inevitably want to get a certain amount up front ie 1/3 of the total liability. The interest rate they charge is quite high and if you default in payment, or fail to file current returns going forward, the revenue may disregard the arrangement and persue you for the balance via the sheriff. Also any interest and penalties are not tax deductable.

Alternatively if you can raise the funds from banks or other sources etc then this would tend to be cheaper cost to you and the interest will be deductable against your taxable income.

Hope this helps

DB

Builderfromhell

Thanks dbran. Very helpful advice.
I have filed all returns but I have not yet been able to apy my income tax for 2007.
I will respond to their warning letter in writing and by phone.
My options for payment are very limited. I cannot see the bank lending me money so I hope an installment system will work.
I might try my credit union and off set the interest gagainst any tax liability in the future.

On a seperate note, I know many people in similar or much worse situations than me.

Thanks again.

dbran

Hi

You never know, the banks might be worth a shot as you say you are confident that things will turn round and you and your staff will succeed. Sometimes it is just a matter of giving the impression of confidence that is enough to get a loan application over the line.

Best of luck with it anyway:)

Kind Regards

Dbran

GS_DBA

Hi sorry to jump on this thread but I am in a similar position and have contacted revenue with via a consultant, and they have come back with a schedule of payments which are totally unrealistic and I would have no chance of paying back on a monthly basis.
I’ve contacted him and said other than the upfront down payment I couldn’t afford to pay them the monthly amount and he basically has said that the max revenue will give me is 2 years to pay back and that they could deduct this amount directly from my bank account as a option, if they did do this I wouldn’t be able to pay my rent, loan etc.
I’ve contacted the bank and they are not willing to extend my loan and I managed to get the upfront payment from the CU.
Can anybody tell me if I have any other options

Builderfromhell

GS_DBA
Sorry to hear you are also suffering.
I wonder what the revenue hopes to achieve by essentially windong up businesses that owe them revenue.
I personally would not be entitled to social welfare but my employees would.
The amount of tax I owe, while large, would eventually be spent by the state on social welfare payments and other financila supports to my employees and possibly myself.
I realise they can't let people off the hook but I expect the number of people in trouble must be increasing by the day. At what point does it become counter-productive to send the sheriffe in to cease assets and sell them for a fraction of their value to get tax back. Thereby leaving a trail of disaster.

Self employed people typically are risk takers and work long hours. are driven as they have no option but to succeed. These are the kind of people that the country needs.

If or when these people fail they get no SW and get hammered for tax due. Don't seem right.

Clanket

GS_DBA wrote: »

Hi sorry to jump on this thread but I am in a similar position and have contacted revenue with via a consultant, and they have come back with a schedule of payments which are totally unrealistic and I would have no chance of paying back on a monthly basis.
I’ve contacted him and said other than the upfront down payment I couldn’t afford to pay them the monthly amount and he basically has said that the max revenue will give me is 2 years to pay back and that they could deduct this amount directly from my bank account as a option, if they did do this I wouldn’t be able to pay my rent, loan etc.
I’ve contacted the bank and they are not willing to extend my loan and I managed to get the upfront payment from the CU.
Can anybody tell me if I have any other options

Hi GS,

Have you taken steps to reduce losses etc. How do you propose to pay your ongoing tax liabilities - as normal?

Are you profitable? It sounds as though you are still unprofitable (unable to discharge a debt over two years).

Unfortunately, I've never seen Revenue giving an installment period of more than 2 years.

GS_DBA

I phoned the Collector Generals office and spoke to the lady who is handling my case she basically said that i should submit a detailed letter stating why i cannot pay the amount in question on a monthly basis, i also have to submit bank statements, all outgoings with paperwork (loans, credit card etc) for 3 months and how i propose to pay off the outstanding amount.
All of this has to be done within the next 2 weeks and once she recieves it she will take it to her superiors and they will make a decision.
So heres hoping

Builderfromhell

Received 'Final Demand' for Tax arrears from revenue today. This was a seperate letter to the one I received last week which was a Final demand for income tax. I replied to the Income tax final demand in detail explaining that I had no money at this time but once I get paid I should be bale to pay my IT.

Todays Final demand is for IT, VAT, PAYE. I have 2 weeks to pay or things may go to court, Sheriff or notice of attachemnt.
The estimates for VAT and PAYE are much more than the amounts due.
I should be bale to pay all amounts once I get paid for 2 jobs in the next 3 weeks.

My question is, Will revenue be reasonable and give me time or will they automatically go to the next level and statr proceedings. Any advice appreciated.

All my time and energy is going into keeping projects moving so as to get paid. It is difficult and exhauting to dealing with everything. I hope Revenue can allow for that.

crazzzzy

Builderfromhell wrote: »

Received 'Final Demand' for Tax arrears from revenue today. This was a seperate letter to the one I received last week which was a Final demand for income tax. I replied to the Income tax final demand in detail explaining that I had no money at this time but once I get paid I should be bale to pay my IT.

Todays Final demand is for IT, VAT, PAYE. I have 2 weeks to pay or things may go to court, Sheriff or notice of attachemnt.
The estimates for VAT and PAYE are much more than the amounts due.
I should be bale to pay all amounts once I get paid for 2 jobs in the next 3 weeks.

My question is, Will revenue be reasonable and give me time or will they automatically go to the next level and statr proceedings. Any advice appreciated.

All my time and energy is going into keeping projects moving so as to get paid. It is difficult and exhauting to dealing with everything. I hope Revenue can allow for that.

Firstly, even if you can't afford to pay anything, file your returns on time as it will save on penalties. Revenue estimate liabilities otherwise and it may seem like you owe more.

Have you spoke to revenue/your accountant about the arrears? If not then get in contact with your accountant or local tax office asap. If they don't know you are in difficulty then they may assume you are just not filing returns. Revenue seemed short staffed at the moment so a phone call may be better than waiting for reply from letter and at least you can sort out all the taxes together rather than having to send in the same info again for PAYE, VAT, etc

If you will have the money in 3 weeks, they may give you that time once they know the situation. Your other options are as already mentioned above - installment arrangement with Revenue or a loan to pay off the liability which would help with cashflow.

Builderfromhell

Thank you for going to the trouble of replying.

I know that these letters are most likely sent automatically by computer or without a great deal of thought by staff. There must be hundreds in similar situations to me.
I am not suggesting the matter is not serious but need to put it in pespective if I am to survive.

I now have a name on the letter so I can give her a call in the morning.

Will post responses here for other peoples benefit.

dbran

Hi

If you ring revenue and tell them the story they will put a temporary stop on this for a few weeks.

Might I ask where is your accountant at this point??

Regards

Dbran

dbran

GS_DBA wrote: »

I phoned the Collector Generals office and spoke to the lady who is handling my case she basically said that i should submit a detailed letter stating why i cannot pay the amount in question on a monthly basis, i also have to submit bank statements, all outgoings with paperwork (loans, credit card etc) for 3 months and how i propose to pay off the outstanding amount.
All of this has to be done within the next 2 weeks and once she recieves it she will take it to her superiors and they will make a decision.
So heres hoping

My understanding is the revenue cannot forgive a revenue debt as a matter of law. Nor can they waive the interest only the penalties. All they can do is give you more time.

Builderfromhell

Thank you Dbran.

I filed my Tax return on time for 2007.
Revenue calculated my tax due and asked for payment some time ago.
For reasons mentioned above I have not paid that yet.

In their final demand letter they say that interest will be calculated from the due date to the court date. If it does not go to that stage I wonder do they still charge interest.

I reaslise I should have been more assertive with clients and made sure I got paid in small amounts regularly. But I am where I am.

I am obviously worried about this and wondering about the worst case scenario. If revenue insist on using courts or Sheriff to get money - they may take and sell what I own. This amounts to tools, an old broken truck and a site which I own with my wife. I rent an apartment with my wife (not working) and 2 kids. If I lose tools and truck I cannot work so easily. I will have no income and still need to pay for rent, food etc. As a self employed person I would not be eligible for social welfare. I might ask this question in the Welfare forum.

I am trying to be positive but with revenue after me, 2 clients refusing to pay (2 year legal battle if we go that route), and very little work on horizon, it's difficult.

I appreciate the advice and comments I get here and actually find writings things down helpful.

dbran

Hi

Here is some information I found on the revenue site which deals with the issue of late payment of taxes.

http://www.revenue.ie/en/business/running/tax-payment-difficulties.html

You need to get in touch with the revenue and ask them to put a stop on the proceedings until a reasonable payment schedule can be put in place. You acknowledge that you can repay but need more time then the two years given.

Once it goes to the sheriff the revenue cannot stop any enforcement action or talk to you.

Regards

Dbran

crazzzzy

Builderfromhell wrote: »

Thank you Dbran.

I filed my Tax return on time for 2007.
Revenue calculated my tax due and asked for payment some time ago.
For reasons mentioned above I have not paid that yet.

In their final demand letter they say that interest will be calculated from the due date to the court date. If it does not go to that stage I wonder do they still charge interest.

I reaslise I should have been more assertive with clients and made sure I got paid in small amounts regularly. But I am where I am.

I am obviously worried about this and wondering about the worst case scenario. If revenue insist on using courts or Sheriff to get money - they may take and sell what I own. This amounts to tools, an old broken truck and a site which I own with my wife. I rent an apartment with my wife (not working) and 2 kids. If I lose tools and truck I cannot work so easily. I will have no income and still need to pay for rent, food etc. As a self employed person I would not be eligible for social welfare. I might ask this question in the Welfare forum.

I am trying to be positive but with revenue after me, 2 clients refusing to pay (2 year legal battle if we go that route), and very little work on horizon, it's difficult.

I appreciate the advice and comments I get here and actually find writings things down helpful.

Hi again, you mention you have filed your 2007 tax return - are all other returns (VAT, PAYE, etc) filed upto date?

There are loads of people in the same situation and it is not easy collecting from debtors at the moment. Try not to panic about the sheriff letters as it will only go to court if you ignore letters or don't agree to repay the liability. Interest is charged on overdue amounts so I'd say you will definitely be charged the interest.

I know you are worried bout your family & business. It is a hard time for alot of people but it is a recession and it will eventually turn around. Try to focus on sorting out revenue and forget bout regretting not being tougher with clients cause thats in the past now.

Builderfromhell

Spoke with a reasonable lady in Revenue today.
She said I need to make my VAT returns and P30 returns asap.
She repeatedly emphasised that the tax due was based on estimates and she needed to see the real situation beofre deciding on a course of action.
She has agreed to let me have two weeks to get returns in.

I pointed out to her that I was having financial difficulties and had been under prolonged severe pressure from work for over a year. She made the very valid point that my financial problems would not have prevented me from making VAT returns.

Dbran, I read the link
http://www.revenue.ie/en/business/ru...ficulties.htmlto
and found it very informative and indeed reasonable.
Revenue cannot adopt a softy soft approach with everyone or their would be thousands trying to get off the hook. Those people struggling and paying tax would then be exploited.

I'll post outcome with revenue for other peoples benefit later.

GS_DBA

Hi All, as i mentioned earlier I had phoned revenue and they asked me to submit a detailed income/expense layout, which i was in the process of doing , but the sh*t has literally hit the fan now.
My contract has been terminated, my work visa is about to expire, my fiance and i have split up.
The job market looks bleak i've been applying like mad, not sure what i can tell the revenue now.

Builderfromhell

Wish I could help you out GS-DBA but your situation seems both tragic and complicated.
Your contract was terminated. Does that mean you were self employed?
I am not an expert, which is why I'm asking questions here, but if revenue can see that you have no immediate or future income wouldn't they decide to drop the case.
If your work permit expires doesn't your visa also expire. If that is the case then Revenue have to let you leave the country. I don't know how they would legally deal with you then.
Hope you can get a new job.
Romance is also not an area I am expert in... or so my wife keeps telling me:p

crazzzzy

GS_DBA wrote: »

Hi All, as i mentioned earlier I had phoned revenue and they asked me to submit a detailed income/expense layout, which i was in the process of doing , but the sh*t has literally hit the fan now.
My contract has been terminated, my work visa is about to expire, my fiance and i have split up.
The job market looks bleak i've been applying like mad, not sure what i can tell the revenue now.

Id say still send in the details they require. You have hit some very bad luck. Hope it starts looking up soon. I was out of work for months and nearly lost hope when i got temporary job and now they have decided to keep me on....keep trying and maybe speak to someone about your visa if possible

Builderfromhell

Sent revenue all VAT returns but not payments.
Paid PAYE & PRSI up to date.
Spoke with revenue and they want payment plan with option to pay over 2 years. However, If I were to do this then I could not pay off early if I had a lump sum.
My question is, if I pay over 1 year I get some breathing space but is interest very high. Who determines interest? Is it a set amount or can the particular Revenue officer decide what it wilbe?

dbran

Hi

I would have thought there no problem paying off early.

I believe the interest rate is set by law and is designed to be penal and expensive. It is also not tax deductable ---double whammy

Best regards

dbran

Builderfromhell

Thank you dbran.
Do you, or anybody, know what the interest rate is?
I find the revenue web site diificult to use to find info.

BFH

dbran

Hi

I believe it is 1.25% per month. Not compounded though, just simple interest!

If you could get a loan to pay this you would be much better off.

Dbran

Builderfromhell

An update on situation.

I have sent all outstanding VAT returns to revenue and sent what I thought was a payment plan but was told I need to send again outlining exact amounts and dates they will be paid. I told the revenue lady that I was meeting with credit union to see about loan and I would send payment plan once I knew outcome.
Putting realistic payment plan together takes time and I have to get it right if I am to make payments.

I got a FINAL WARNING today from the Specialised Enforcement Unit giving me 20 days to pay all monies due or criminal proceedings will start and I will additionally be fined 5,000 for each VTA return not made. that's an extra €30,000.

I got the letter this evening so could not contact revenue. As letter was sent from a different department I am hoping it was sent without the knowledge that I am in the process of making proposals to pay tax due.

I won't know till tomorrow and can only hope and pray it will not come to this.

joanofarc

i'm gona be of no real help....but as a self employed person myself i can feel your pain!!!! play the revenue game as much as you can i.e return their letters/calls/requests etc and just do the best you can do and be honest with them about your situation and hopefully it will all come good.
best of luck to you and i really hope things turn around for you:) this too will pass!!!!

joanofarc

how are things working out for you?