Preliminary Tax 2011

MAR86

Hi there,

I have some problems, like many others:), with paying preliminary tax for 2011.
I understand that I could pay 90% of current tax year or 100% of previous tax year. If I choose to pay 90%....do i need to find out the net profit till 31st Oct, than calculate PRSI and USC?
I do this for my boyfriend, he's a sole trader, but his main income comes from Irish income, his employer already pays PRSI and USC and he is already using his tax credits: personal tax credit and PAYE credit.

Now, can I use them again in my Income Tax computation?

If I choose to pay 100%, i suppose that will be NIL...

Some help please....almost there and I don't have a solution:)

If you choose to pay 90% you're effectively estimating what the liability will be including income levy and USC.

labradoodlelady

It's easier to pay 100% of the 2010 liability rather than estimating 90% of the 2011 liability. However, if you had a nil liability in 2010 and you expect profits to increase substantially in 2011, you might be better calculating rather than being faced with a big bill in 2011, for 2011 tax and preliminary for 2012. Or vice versa.

I presume it's a small amount of income from self employment and PAYE income that you are working out?

For 2011 preliminary taxed based on 100% of 2010 liability, you need to take 100% of the tax (exclusive if levies, prsi) due from self employment for 2010. You do not need to calculate the liability based on the 2011 bands and credits.

Add preliminary PRSI and USC.

PRSI on self employment, 4% of self employed income for 2010. Floor is 5,000.

Add USC on self employed income for 2010.

2% on first 10,036
4% on next 5,980
7% on balance

If this 16k band will be reached from the PAYE employment, then calculate all at 7% of 2010 income.

Do you mean can you use his credits when computing his income tax or can you use them for yours. You can't use his credits unless you are married. You can include his credits in his income tax computation, but you also need to include his PAYE income as well in your computation and return.

MAR86

This is what I did, I filed the Tax Return for 2010 and I also added his income subject to PAYE, all the taxes he has paid and all the credits he is entitled to and he has used.

I did it online on ROS, at the end I chose print preview and they told me that balance due for 2010 is 39 euro and preliminary tax for 2011 is 36 euro?

So this is what I have to pay, 36 euro?:D (he had only a small profit for 2010, for 2011 he's done much better)....do I need to add USC and PRSI to this?

Thanks a lot for your replies, very helpful!!!

labradoodlelady

Just pay what ROS is suggesting and that will be sufficient. Just keep in mind that if his profits have increased dramatically, then this time next year he will have a higher tax liability.

MAR86

Thanks a lot for your feedback, much appreciated and really helpful!

ei.sdraob

I am not an accountant, but as a small business owner, I have a question

What is the point of Preliminary tax but to create more red tape, confusion and aid beuracracy?

Clanket

So the government get their money quicker

lomb

labradoodlelady wrote: »

PRSI on self employment, 4% of self employed income for 2010. Floor is 5,000.

Add USC on self employed income for 2010.

2% on first 10,036
4% on next 5,980
7% on balance

I

Does this mean if one earns 5000 then no prsi is payable , but if say 5001 then 200 euro is payable? Thanks

labradoodlelady

Short answer is yes!
Just to note that the 4% and the 5,000 floor are applicable to 2011. So, as a self employed person earns €5,000 in 2011 there is no PRSI, however once he earns €5,001 then he becomes liable to PRSI at 4%. However, the minimum PRSI contribution for self employed is €253.
If you are talking about the 2010 tax year, self employed PRSI was 3% and a floor of €3,174. So, for 2010 once you hit €3,175 the whole lot becomes chargeable at 3%, and again the minimum contribution is €253.
The situation is similar with the health levy (2010). The floor here is €26,000, but once €26,001 is earned, then the 4% levy is applied. It is quite harsh in that respect on individuals who are marginally over the threshold.

Re the point of preliminary tax – good question! I would assume that it’s mainly for cash flow purposes for the State. However, if you look at it from the angle that a PAYE tax payer pays his tax on a weekly/monthly basis. The self employed tax payer pays his preliminary tax for 2011 at the end of October 2011.

lomb

I take it self employed capital allowances were not allowed in 2010 against either PRSI or the health levy?
Quite harsh really, no wonder no one wants to pay their tax and fiddle a part of the cash element into their pockets.

labradoodlelady

No, you can use capital allowances for self employed persons when computing the income chargeable to both PRSI and the health levy as well as income tax. They cannot be used in calculating income income levy purposes.