How is preliminary tax legal, and is it mandatory? + Instalment question

danny1986

Question 1)

I got my tax bill for 2013 and it was 7k. I hear that i should also be paying tax towards next year though (from my accountant) so my bill should really be 14k?

How is that even legal? Why should i have to pay tax towards money I haven't even earned yet?

Is paying this preliminary tax a legal requirement, or is it an optional thing? I don't even have the 7k, let alone 14k. I find this hole thing to be a money grabbing farce, and very unfair on those of us who are struggling to get by as it is. Just because I had a good year last year, doesn't mean i'm having one this year.

I also did have about 10k saved to pay the tax, but then lost a contract and was out of work for several months, and had to use the savings to eat, so this is an even lower blow.

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Question 2)

As stated above, I do not have the funds to pay my tax bill for 2013 outright. Does there exist a payment plan you can take out with the tax office to pay the bill in monthly instalments spread out over a period of time? Basically all I am looking to know is if there is such a thing, and who I would get in contact with to set it up.

Any advice would be great, please don't just say "talk to your accountant" as they say that paying this is my issue and they can't intervene... so I want to know what my options are.

Note: i am not an accountant, legal adviser or knowledgeable in this area.

Sunny Dayz

RE question 2:


You can ring the Collector General's office in Limerick who deal with tax payments and they may allow you to set up an instalment agreement.


Also, did you submit the tax return yourself or did you get the accountant to do it for you? If you submitted it yourself, the accountant may not be registered as your tax agent with Revenue and therefore Revenue won't be able to discuss your tax affairs with them. If they did file your tax return, they are your tax agent and they should be able to help you in your negotions with Revenue.

danny1986

Sunny Dayz wrote: »

RE question 2:


You can ring the Collector General's office in Limerick who deal with tax payments and they may allow you to set up an instalment agreement.


Also, did you submit the tax return yourself or did you get the accountant to do it for you? If you submitted it yourself, the accountant may not be registered as your tax agent with Revenue and therefore Revenue won't be able to discuss your tax affairs with them. If they did file your tax return, they are your tax agent and they should be able to help you in your negotions with Revenue.

Thanks for the info. The accountant submitted the tax returns on my behalf, and they made up the account for the year

whatawaster

I'm open to correction on this, but . . .

In Nov 14 you pay a) your tax bill for 2013 and b) preliminary tax for 2014

Your preliminary tax for 2014 is either:
(i) 100% of your 2013 liability (ie: 7K)
(ii) 90% of your expected 2014 liability. Judging by your initial post, would I be right in saying that 2014 will be a loss-making year? If so, won't need to pay preliminary tax. Be aware though, that there may be penalties if your final 2014 tax bill is higher than expected.

Furthermore, if you make a loss in 2014, ensure your accountant is utilising these losses fully. You may be able to carry them back to 2013 and lower your tax bill for that year.

dbran

Hi

Of course its legal!!

You pay the tax on the income that you earned in 2013 in October 2014. So that means you effectively are paying the tax on the profits 10 months after you have earned them (or the balance of the tax if appropriate).

You pay preliminary tax in October 2014 for income that has mostly already been earned in 2014.

If you were working PAYE, or a director of a limited company paying tax via paye, you would be paying tax on a monthly basis on income that is earned in that month.

So the difference is one of cashflow only and you need to make sure that you have kept back enough so that you can pay the tax each year in October. I know this can be difficult to manage especially when you dont know the level of your profits with certainty but that's the joys of being a sole trader.

If you get onto revenue arrears section of your local tax office they should be able to put a phased payment arrangement in place for you.

dbran

dbran

whatawaster wrote: »

Furthermore, if you make a loss in 2014, ensure your accountant is utilising these losses fully. You may be able to carry them back to 2013 and lower your tax bill for that year.

Unfortunately this only works for companies and not sole traders.

dbran

danny1986

Sounds like I need a better accountant. My accountant said they were not allowed to look into it on my behalf. Seems as though that is BS then.

Well worth the 800 euro my yearly accounts cost this year... /sarscasm

Immy

danny1986 wrote: »

Sounds like I need a better accountant. My accountant said they were not allowed to look into it on my behalf. Seems as though that is BS then.

Well worth the 800 euro my yearly accounts cost this year... /sarscasm

I would look at a new accountant.

I would be raging if a client of mine was on boards looking for advice cause they couldn't or wouldn't ask me.

danny1986

Immy wrote: »

I would look at a new accountant.

I would be raging if a client of mine was on boards looking for advice cause they couldn't or wouldn't ask me.

As i said, i did ask. They said it wasn't their concern and couldn't handle it. I have found them poor all round, and it seems like im doing most of the work myself and have been given countless bad advice.

They even told me before that i couldn't pay my tax via instalments because the option didn't exist, and had me worrying for ages until i found out that i could myself.

I have every right to speak out. I also haven't named any names, so i feel your comment is unjustified

Ps: if i took your comment the wrong way, please let me know!

Immy

danny1986 wrote: »

As i said, i did ask. They said it wasn't their concern and couldn't handle it. I have found them poor all round, and it seems like im doing most of the work myself and have been given countless bad advice.

They even told me before that i couldn't pay my tax via instalments because the option didn't exist, and had me worrying for ages until i found out that i could myself.

I have every right to speak out. I also haven't named any names, so i feel your comment is unjustified

Ps: if i took your comment the wrong way, please let me know!

Yes you took it the wrong way. I meant get a new accountant as if your accountant can't help you with this kind of thing then they aren't worth having.

I understand you coming to boards for help, but what I meant was I would hope no client of mine would have to go to boards for help as I would give them any help or guidance that they needed.

danny1986

Immy wrote: »

Yes you took it the wrong way. I meant get a new accountant as if your accountant can't help you with this kind of thing then they aren't worth having.

I understand you coming to boards for help, but what I meant was I would hope no client of mine would have to go to boards for help as I would give them any help or guidance that they needed.

That makes sense, and I agree, it is very disappointing.

Out of interest, is that 800 euro figure for preparing a years accounts for a sole trader a standard figure or relatively high? My first year they only charged 250 euro, so i found this figure a big punch in the gut.

Thanks