Tax Return with no records

Man007

Hi

A family member has asked me to do a tax return for them they became self employed operating as a sole trader in 2016 and didn't have to pay tax that year given it was their 1st year so oct will be their first filing.

Problem is they have kept very little records they have a patchy record of revenue but have kept literally nothing in terms of cost of sales or expenses what happens im this situation can you estimate and hope not audited or what's the procedure.

Thanks

wally1990

Man007 wrote: »

Hi

A family member has asked me to do a tax return for them they became self employed operating as a sole trader in 2016 and didn't have to pay tax that year given it was their 1st year so oct will be their first filing.

Problem is they have kept very little records they have a patchy record of revenue but have kept literally nothing in terms of cost of sales or expenses what happens im this situation can you estimate and hope not audited or what's the procedure.

Thanks

The Revenue Commissioners can impose various levels of fines and penalties for the incorrect or fraudulent use of the Irish tax system.

The main penalties being imposed are for:

Late submission of tax returns
Non filing of tax returns
Errors or fraudulent declarations on tax returns
Late payment of taxes due.
The level of neglect or misconduct determines the penalty that will apply.

For example in a Revenue Audit case the lowest penalty that Revenue can impose is 3% but the highest penalty is 100% of the tax liability.

The interest rate on overdue tax in respect of income tax, corporation tax, capital gains tax, gift and inheritance tax is currently 0.0219% per day.

The interest rate on overdue tax in respect of indirect taxes, such as VAT and PAYE is currently 0.0274% per day.


Where a return of income or corporation tax return is delivered less than two months after the return filing date, the late submission surcharge is 5% of the tax liability, subject to a maximum surcharge of €12,695.

Where a return of income or corporation tax return is delivered two months or more after the return filing date the late submission surcharge is 10% of the tax liability, subject to a maximum surcharge of €63,485.

Revenue can impose interest on the late payment of the tax liability at the rates outlined above.

The taxpayer can appeal for the late submission surcharge to be reversed for example in a case where there was a major failure in a computer system or a serious illness.


Firstly if he/she is unsure of any tax laws or regulations you should contact an accountant.

If the family member make a mistake on their tax returns Revenue can impose penalties.

If he/she understate income on their tax returns they can be penalised even if the excuse is that they were unaware of the relevant tax laws. Ignorance of the law is no excuse.

This is known as careless behaviour and the level of penalty that would apply will depend on whether the mistake has significant tax consequences.

The penalties could be reduced if he/she notify Revenue of the errors, cooperating and assisting them to work out the additional tax due.


Your family member is responsible for all tax returns, calculations and not you (remember that) on their behalf and making payments even if they use an accountant.

wally1990

The following is a list of penalties for VAT:

failure to register as an accountable person — €4,000
failure to charge the VAT and pay VAT over to Revenue — €4,000
failure to keep proper books and records — €4,000
failure to comply with invoicing requirements — €4,000
failure to furnish a quarterly statement of intra-Community supplies (VIES return) to the Revenue Commissioners — €4,000
assisting in making incorrect returns, invoices, credit notes — €4,000
failure by a flat-rate farmer to issue an invoice showing the flat-rate addition — €4,000
issue of a VAT invoice by a non-registered person — €4,000
unauthorised charge of a flat-rate addition — €4,000
willfully obstructing or delaying an officer authorised by the Revenue Commissioners in exercising his or her powers — €4,000
preventing or obstructing a person authorised by the Revenue Commissioners to inspect property for the purposes of valuing the property for VAT purposes — €4,000
in the case where the failures or acts referred to above are carried out by a body of persons, the secretary of the body is liable for the payment of a separate penalty — €4,000
supplying taxable goods and services in contravention of the requirement of security for the protection of the Revenue (Section 109 bond) in respect of each such supply — €4,000.
Penalties for deliberate or careless behaviour
Penalties will be applied if you:

deliberately or carelessly furnish an incorrect return
make an incorrect claim or declaration.
The penalties are applied on the difference between:

the amount of tax paid or claimed, if any
and
the amount properly payable or refundable.
The penalties vary and depend on various factors, such as:

whether the person carelessly but not deliberately failed to comply
whether the person co-operates fully with Revenue and the timing of that co-operation in certain circumstances
whether a person makes a qualifying disclosure.
Further guidance contains more detailed information on interest and penalties.

wally1990

Also check this

http://www.revenue.ie/en/vat/vat-records-invoices-and-credit-notes/vat-records-to-be-kept/index.aspx

And

http://www.revenue.ie/en/vat/vat-records-invoices-and-credit-notes/invoices/index.aspx

dbran

Hi there

Doing work for family members is always to be viewed as a high risk. If things go wrong, there can be long term repercussions that may damage your relationship with that part of the family.

If they have not been keeping proper books and records I would seriously consider giving it a pass. They need to contact a professional accountant with more experience of this senario.

You cannot simply make up the figures for them and if the records are not there then there is a problem.

Regards


Dbran

wally1990

dbran wrote: »

Hi there

Doing work for family members is always to be viewed as a high risk. If things go wrong, there can be long term repercussions that may damage your relationship with that part of the family.

If they have not been keeping proper books and records I would seriously consider giving it a pass. They need to contact a professional accountant with more experience of this senario.

You cannot simply make up the figures for them and if the records are not there then there is a problem.

Regards


Dbran

As above I'd be washing my hands with this

They didn't keep any proper records

You do a favour and could get it wrong or they get audited and charged

And you look like the bad one for doing a favour

Wash your hands with it and advise he needs a proper accountant to ensure his/her best interest to make up for his/her illresponsibility

Don't put yourself in this position is my advice

CIARAN_BOYLE

before I tell you wash your hands can records be produced. if he pays for everything through the bank the bank statements are records. if he has one supplier that produces states the atatements could be records.

Man007

CIARAN_BOYLE wrote: »

before I tell you wash your hands can records be produced. if he pays for everything through the bank the bank statements are records. if he has one supplier that produces states the atatements could be records.

They don't have a bank account for the business it would mostly be cash basis although they do use one supplier which would be paid for by credit card. Would credit card statements be enough I would have thought no.

I'm leaning towards taking the advice here and steering clear.

CIARAN_BOYLE

Man007 wrote: »

They don't have a bank account for the business it would mostly be cash basis although they do use one supplier which would be paid for by credit card. Would credit card statements be enough I would have thought no.

I'm leaning towards taking the advice here and steering clear.

probably best to steer clear. revenue do accept credit card statements in audit but it very much annoys them.

you can get by on bank statements but if it's cash based run a mile.

harr

Man007 wrote: »

They don't have a bank account for the business it would mostly be cash basis although they do use one supplier which would be paid for by credit card. Would credit card statements be enough I would have thought no.

I'm leaning towards taking the advice here and steering clear.

Run and run fast , I wouldn’t touch this to be honest it going to be a nightmare and will more than likely get very messy... get a proper accountant on to it.
Happened to a neighbour of Mine a few years back when he became a driving instructor he was fine in the first year as no returns needed ..,second year no paper trail what’s so ever and revenue none to happy as he tried to do the books himself..,ended up with a tax bill for 6 grand , third year trading he folded so again no tax taken care of ..still owes the tax man near 12 grand .
Some people just don’t have the head to run a business.

exaisle

This is a family member who needs help....not somebody who needs scaremongering cut and pastes from the revenue website.

Firstly, OP needs to instruct the relation what records are appropriate for his business and to ensure that these are kept from now. This should be the limit of OP's involvement.

If he started business in 2016, then his first tax return (and the one for 2017) isn't due until next year. On the basis of the 2-3 months remaining of 2017, it should be possible to reasonably extrapolate how the business performed from several angles...gross margin, level of overhead, etc. Also, the level and standard of living should reveal how much in drawings is involved. This, with the use of an opening and closing statement of affairs will point towards a level of profit. But that's all for a competent accountant.

I'd suggest that OP recommends an independent accountant for his relation.

As there is no obligation to submit a return just yet, there's no need to panic, but immediate action is required.