Income Tax on Savings

ANewStart

I'm going through an Audit at the moment and have been getting mixed opinions on this. Can anyone help.

In 2009 I has 20k in savings. I earned €700 in interest, and had dirt taken off it by the bank automatically. My accountant now says I should have paid PAYE/PRSI on the rest of the interest as this was income. This is a massive hassle as it means going a disclosure etc. Is this true?

nompere

Your accountant is right. In 2009 deposit interest that had suffered DIRT was still liable to PRSI, and some, but not all of the levies. Did he really say PAYE?

You're paying him for his advice - why don't you want to believe him?

ANewStart

because I don't want to!!!

thanks for the feedback

Alan Shore

ANewStart wrote: »

because I don't want to!!!

thanks for the feedback

I presume you are a self employed Class S contributor to pay PRSI on deposit interest.

blobbie

Get a new accountant

http://www.revenue.ie/en/tax/dirt/

"D.I.R.T. is a final liability for income tax purposes, i.e. the payment of retention tax at the standard rate by individuals liable to income tax at the higher rate is regarded as satisfying the individual’s full liability to this tax.

However, in certain circumstances, an individual will also be liable to pay PRSI in respect of the Deposit Interest received.

The Universal Social Charge (USC) does not apply to Deposit Interest that has been subjected to Deposit Interest Retention Tax."

nompere

There was no USC in 2009 - there were PRSI and levies. None of those are tax, though they do feel just the same.

The_Bot

In 2009 Irish bank deposit interest was liable to PRSI and the Health Levy (but not Income Levy).

This only applied to self-employed individuals, it is a quirk in the system that an employed individual would have had no PRSI/Health Levy liability on Irish bank deposit interest where as a self-employed individual would have. This might be the source of your mixed opinions.

Note that PRSI and Health Levy are not taxes but are social insurance contributions collected by Revenue on behalf of the now Department of Social Protection.

Take the time to discuss your disclosure options with your accountant, I don't know what stage you are in the audit process (has it even commenced?) but there are benefits to making a qualifying disclosure in terms of mitigation of penalties and taking the items disclosed off the table in terms of meeting the criteria for publication as a tax defaulter. I'm not trying to sound alarmist when I say that but it is an important discussion to be had.