Preliminary Tax Advice

aidocore

Hello all, long time tax advice taker, first time poster. It's that time of year again for Preliminary Tax questions.

I am a sole trader and am sorting out my Preliminary Tax for 2017.

My total tax liability for 2016 was nil except for the minimum €500 PRSI contribution. (already paid)

This year however I have been doing a lot better and will certainly have some 'actual' tax to pay.

I work in a creative field with income that fluctuates without any real predictability.

Question 1:
So this year would you advise that I;

(a) Pay 100% of 2016 = €500 (this doesn't 'feel' like the correct thing to do)
(b) Pay 90% of my unknown total figure for this year

I can understand if my income was predictable, it's fairly easy to pay 90% of what my income would be.
With my job however, It's possible that I may get a €5,000 commission in Dec this year, or it's also equally as possible that I might not, making it very hard to pin down a 90%.

So let's say I pay, what in good faith I think that 90% will be and that ends up only being say 80% of my total, what's likely to happen in terms of interest / penalties?

Or am I best to pay 100% of last year (only €500) as it's a certainty and then pay the balance in Oct 2018 along with Prelim tax for 2018 (a double whammy)

Question 2:
When filling out the form, does it actually give the option to state that it's 100% of last years or 90% of this years that you are paying, or is it simply a total figure that you just input?


Question 3:
If I am paying 90% of this years income, am I allowed to claim 100% of my tax credits for this year against this?

Many thanks and I hope I phrased my questions well

nompere

If you pay €500 in preliminary tax you will have fulfilled your PT obligations.

If you choose to pay a figure that you think will be 90% of your actual liability, and that is higher than €500 then you will also have fulfilled your PT obligations.

It is only if you choose to estimate 90% of the actual liability, and that figure is lower than 100% of the previous year's liability, that you might have a problem.

Practically speaking, your best option is to pay €500 and stick the remainder of your estimate of the actal liability into savings account, and earn a little interest. Then you have the cash to meet the double whammy.

scheister

I would fall somewhere in the middle,

By paying the €500 your have met your PT obligations.
The larger issue is say the tax turns out to be €5,000. you will then have to find 9,500 next October/November to cover the 2017 balance and 2018 preliminary tax. If i was you and cashflow allows i would make a larger payment im the prelim so not to give yourself a larger bill next October.

aidocore

Thanks for the replies, some great info!

A follow up question;

Do you know when the earliest in 2018 that the return for 2017 can be paid?
I might pay the €500 as prelim, then say in Jan /Feb 2018 I can pay the balance for 2017 (as I will know what my total is), and then in Oct 2018 pay Prelim again.

Can filing a return and preliminary tax be done separately as different transactions at different times next year?

Thanks again

scheister

aidocore wrote: »

Thanks for the replies, some great info!

A follow up question;

Do you know when the earliest in 2018 that the return for 2017 can be paid?
I might pay the €500 as prelim, then say in Jan /Feb 2018 I can pay the balance for 2017 (as I will know what my total is), and then in Oct 2018 pay Prelim again.

Can filing a return and preliminary tax be done separately as different transactions at different times next year?

Thanks again

not aware of any reason why you could not pay the money in Jan/Feb or make monthly payments for the balance. As far as Revenue are concerned one its all paid by due date they dont care

aidocore

Thanks!