Tax mess - what should I do

Master Debater

Myself and my wife went to an accountant last year as she left full time employment in 2007 and went part time. I am a full time PAYE worker. We wanted the accountant to sort out my wife's taxes and PRSI from 2007 to date. The accountant suggested that we get assessed jointly for tax and that he would work out a way whereby we paid all our tax at the lower rate. The scheme involved me becoming my wife's boss and paying her a salary, in a consultancy role. In the tax returns this payment went down as a loss to me and a profit to my wife. It resulted in a significant tax refund from the revenue for years 2007 to 2009. I have never really been happy with the arrangement, and have recently sought a second opinion from another accountant who said that it is not something that he could see standing up to scrutiny in a tax audit. I am now terrified of us being penalised in an audit. Has anyone any advice on this ? I intend going back to the accountant to ask him to stop this arrangment going forward. However, I am wondering what the penalties would be if the revenue were not happy. Could we get charged double the refund in penalties or could it be even higher ?

nompere

You've paid one accountant for advice that you weren't happy with. You're now paying another who broadly agrees with you. I don't understand why you come on here, not knowing who might reply to you, asking questions where we just don't have anything like enough information to give you a proper answer. You need to stay with a professional you trust.

Interest on late paid tax is charged at roughly 10% per annum. Penalties on audit can range from 5% to 100% of the tax depending on your previous history, the degree of culpability, and the level of co-operation you give. Getting to them before they come to you is always a good idea.

A good adviser can often mitigate penalties - Revenue generally won't accept anything less than the full interest on the tax liability.

If you look at settlements published on the Revenue website interest is often the largest part.

dbran

+1

From what you appear to be saying you are not actually running a business but just paying your wife a salary and offsetting the resulting loss against your PAYE income. Is this correct? If this is the case then the 2nd accountant is probably correct and it is unlikely to survive a revenue audit.

As nompere said, "shopping" for advise is never a good idea. If you dont trust your professional adviser its time to get a new one, and not one that just tells you what you want to hear.


dbran

Master Debater

Thanks for the helpful responses. If I change accountants now, and get audited in a couple of years time, is the original accountant obliged to sit in and help with the audit?

dbran

No. But why would you want him to if you don't trust his knowledge.

Master Debater

What would you do in my situation? If what the accountant has done is illegal, does he not bear any responsibility for recommending such a strategy?

dbran

Hi

I honestly dont know. It depends on what the actual facts of the case are, what you actually told him at the time etc. This is too much to discuss via online posting.

If you believe that the tax treatment is wrong and you believe that you have claimed a refund that you were not entitled to, then you need to pay it back.

Make an unprompted qualifying disclosure to the revenue to mitigate the penalties and if you cant afford to pay it back in one go, try and enter into an installment arrangement to do so.

If you dont trust the 1st accountant to do the above then move.

Kind Regards

dbran

Master Debater

Thanks Dbran. Myself and my wife are both sick with the worry

Alan Shore

Was he trying to give your wife a source of income so that she used up the standard rate band or was the loss more than 27000?