Rental Income Tax Issues

darlett

Hi,
The issue is I've overlooked that I had to pay it. I know there's a sizeable allowance for live in landlords, and thought I would be covered by something similar as I have a modest rental income, but I see now I'm very wrong and I want to fix things asap.

I have one property, a semi D in a small country town which I have been renting out for €550 monthly since about June 2014. I'm not too concerned with 2014 as I had been making mortgage repayments to a credit union with very high interest rates. Those plus PRTB registration and insurance costs feel like that will be ok once they are deducted.

2015. I had managed to switch to a bank mortgage but my income was nil as I was out of the country largely been supported by my girlfriend. Was I thus a non resident? I'm not even particularly sure of what year I settle up for when.

For 2016 I was back working here in Ireland and have been since. As I will have earned about €20-30,000 per annum and used my normal tax credits, does that mean I'll be liable to pay 20% for the net rental income for 2016 and 2017. So for a likely e.g. for about €5000 ill need to foot up €1000 per year to revenue to clear myself? (Sorry if im been overly simple but Im fairly gutted to wake up to this news and don't currently have the funds).

The limit of €5000 for reporting rental income to revenue to either myaccount or ROS has me unsure. If my deductions such as mortgage interest relief plus insurance etc brings me from €6500 down to €5000 does that then mean its myaccount and no longer ROS. Are there any advantages to the latter? I am on good terms with my tenants and usually give a Christmas gift such as an all4one voucher. Is this relevant information, or not? I'm renting a room myself closer to work in the city. Again wondering if that's in any way relevant.

I set up the house in 2014, installing kitchen and electrcial items, beds, insulation, radiators and plumbing etc. I don't think I've receipts for any of this, so I can't deduct the 12.5% depreciation factor either.

I know the sensible advise is to hire an accountant but at this instant I'm utterly broke. Hoping maybe later in summer to be able to find and hire the services of one (I would be grateful for any recommendations via pm).

Gumbo

To be honest, I think some of your assumptions are way out.
Best to engage a tax consultant to prepare a return based on each year and approach revenue or advise.

The accountants fee is completely tax deductible.

Samuel T. Cogley

You're going to be a damn sight more broke if you get audited.

Stheno

You could owe up to 40% of the rental income in PAYE then Prsi and USC if you are earning 30k.

Also the revenue charge interest and penalties on late returns.

You'll save yourself what you spend at least if you go see an accountant.

darlett

Samuel T. Cogley wrote: »

You're going to be a damn sight more broke if you get audited.

I agree. I'm intending to do something about it. Unfortunately the week of my enlightenment has me rocking a two figure sum in my account. And not even a big two figure sum at that. kceire's info on accountants fees being totally tax deductible, and pay day being later this week has me more hopeful but it'll take a bit of fixing so I have to hope I'll stay lucky until I right my wrongs.

Samuel T. Cogley

darlett wrote: »

I agree. I'm intending to do something about it. Unfortunately the week of my enlightenment has me rocking a two figure sum in my account. And not even a big two figure sum at that. kceire info on accountants fees been totally tax deductible, and pay day being later this week has me more hopeful but it'll take a bit of fixing so I have to hope I'll stay lucky until I right my wrongs.

I wouldn't lose sleep over it, but don't put it on the long finger either.

Best of luck with it.

Bubbaclaus

I'm always curious about people that generate income from an asset in the state and just assume it's not taxable.

Hack12

PAYE income has nothing to do with RI. RI is a different Tax Class and taxed in its own right.

Example deductions are allowed such as
- 75% mortgage interest 80% last 2 years
- Life insurance
- Building and Contents insurance
- Management fees

Get an accountant and maybe they can get a payment plan in place with Revenue on your behalf.

Stheno

Hack12 wrote: »

PAYE income has nothing to do with RI. RI is a different Tax Class and taxed in its own right.

Example deductions are allowed such as
- 75% mortgage interest 80% last 2 years
- Life insurance
- Building and Contents insurance
- Management fees

Get an accountant and maybe they can get a payment plan in place with Revenue on your behalf.

Not quite. Taxable rental income is added to paye income now and taxed as such. It changed about a year ago or so

Bubbaclaus

Stheno wrote: »

Not quite. Taxable rental income is added to paye income now and taxed as such. It changed about a year ago or so

What changed a year or so ago? I'm curious because I've worked in tax for quite a number of years and have literally no idea what you are on about here.

Stheno

Bubbaclaus wrote: »

What changed a year or so ago? I'm curious because I've worked in tax for quite a number of years and have literally no idea what you are on about here.

I went and checked. It changed in 2014 for paye workers with rental income


https://www.google.ie/amp/s/www.irishtimes.com/business/commercial-property/income-tax-return-for-2013-what-landlords-need-to-know-1.1921632?mode=amp

Bubbaclaus

Stheno wrote: »

I went and checked. It changed in 2014 for paye workers with rental income


https://www.google.ie/amp/s/www.irishtimes.com/business/commercial-property/income-tax-return-for-2013-what-landlords-need-to-know-1.1921632%3fmode=amp

I cannot access the article, but presumably the article is in reference to the introduction of Class K PRSI on unearned income.

Can you tell me about the change you mentioned in your first post?

darlett

Bubbaclaus wrote: »

I'm always curious about people that generate income from an asset in the state and just assume it's not taxable.

Ok, Ill take your curiosity at face value. I might not be able to ease all this curiosity but without being overly defensive Ill try to lessen it for some of the cases similar to myself you might see, if there are any.

I did business studies to junior cert. If you ve worked in tax for years perhaps you did accountancy for your leaving, a few years at third level, before the real learning began as it often does on the job.
Language and phrasing that is perhaps embedded in your thinking as very basic page one material from having worked in tax for years is alien and new to others who never even held the book. I never looked at my house and saw it as "an asset in the state". I never saw it as not an asset in the state as I never considered it in those terms at all. I dont blame you for your curiosity at perhaps just how ignorant I could be in not being in some way more familiar with that. I'm sure there's knowledge that Ive gathered over the years from my own employment which I take for granted which isn't as everyday-ish as it seems. Well I hope there is anyway!
Lest the curiosity is based reasonably enough on whether I was trying all the while to avoid tax responsibilities, then no. I used an estate agent to find and set up the initial contract with my tenants, I registered the tenancy from the start with PRTB, changed my insurance (of course) and the rent exchanged has never been cash. Even during amateur hour I wouldnt have taken all those steps if I was trying to be underhand.

You might ultimately conclude that I had no business renting out my house, and I'd have to agree, I probably had no business at all. I viewed the whole relationship between myself, my tenants and my/their house as more personal than professional and once my house wasn't been abused and my tenants were happy I never saw or grasped the bigger picture. I regret been so lax but the reality was I never really looked twice, largely because compared to the former issues its actually kind of boring. <And do you still think its boring now you're in deep trouble? No sir. Sorry sir./>

Claw Hammer

The thing to do is get a competent tax adviser/accountant. Put all your cards on the table. Do the returns. If you owe money to the Revenue, and can't pay any or all of it, agree on a schedule of payment with them. The situation you describe happens frequently. People let their affairs get out of hand. The Revenue are well used to it. They prefer that people come forward and sort it out before it gets too bad. There is nothing to be gained by letting it slip further. Sooner or later the Revenue will turn up asking questions. There will be no Mr. Nice Guy if that happens.

darlett

Claw Hammer wrote: »

The thing to do is get a competent tax adviser/accountant. Put all your cards on the table. Do the returns. If you owe money to the Revenue, and can't pay any or all of it, agree on a schedule of payment with them. The situation you describe happens frequently. People let their affairs get out of hand. The Revenue are well used to it. They prefer that people come forward and sort it out before it gets too bad. There is nothing to be gained by letting it slip further. Sooner or later the Revenue will turn up asking questions. There will be no Mr. Nice Guy if that happens.

And I will. For practical reasons its something that will have to keep on ice a more few days, but I will approach and attempt to hire someone next week to help me get back in the right asap. Sods Law will see me get called before then of course!

Some_randomer

@darlett curious as to how you got on with all this, did you get sorted?

3DataModem

Four things;

1. You can make a voluntary disclosure called an "unprompted disclosure" to the revenue. Once you go down that route they will not audit you, they give you time to make that disclosure in detail. I've done this AFTER getting notification of their intent to audit (referred to as a "prompted disclosure", and it stopped the audit in it's tracks while I had 3-6 months to do the disclosure.
2. You can send them a few grand (if you have it) to stop the clock on interest and penalties right now. If you pay too much, you get a refund when it's all done and dusted. The revenue's interest rate is the highest legal interest rate in the state, so you are always better paying them first.
3. You have a fairly lumpy allowance for expenses relating to the property. Stationary, phone calls, maintenance. While receipts are usually necessary, when in this situation they are not always. If you paid a tradesman 300 to fix a washing machine in cash, it can be taken into account when making your disclosure. My Tax advisor at the time said it "if you spent it, it's allowable, the revenue might challenge, but you are still allowed to claim"
4. You may have unclaimed allowanced from 2015 and after. It's possible that these overpayments may offset the underpayment of rental income, and most importantly, means that the interest from them will be lower. E.g. if you owed 1000 in 2015 and hadn't claimed 400 for some other thing in the same year, the interest would only be calculated at 600 not the full 1000.

As stated, I've been in a similar situation and getting a tax advisor was very very helpful. Reduced the stress, and saved me money.

DownByTheGarden

Go to a tax consultant and they will work out how much you have to pay and arrange for it to be paid. Revenue wont tell you what you owe them in advance.

A similar thing happened to me with income that I forgot I even had as it went into an account id forgotten about.

You have to pay interest and penalties on top of what you owe them. And dear God are they a lot.

For example my oversight was income of around €6000 over about 5 years.

By the time I was done I had to pay the normal tax on that. Plus another €8000 in interest and penalties and the tax consultants fee too.

So get it sorted asap. The longer you leave it the worse it will be. And if they audit you it will be even worse.

Dont know how true this is but a colleague of mine who used to work in revenue told me that they already mostly know who is dodging tax. Then at some point they put a team together and pick one specific area (a famous one was offshore accounts, another soon to come will be landlords who havent paid tax, but they will leave that for a few years yet i think.) to concentrate on and go after all those who owe tax, interest and penalties. That team gets a list of all the people they go after, they release a press release to ask people to come to them for an amnesty of some or all of the penalties and then they hit the rest who dont come to them with the hammer. There are supposed to be several of these "lists" maintained and just waiting for the right time to activate them.

HeidiHeidi

Just FYI to the posters providing detailed advice - this thread is from 5 years ago!

Why a poster dug it up today wondering how the OP got on, I have no idea.

You'd have to hope s/he got it sorted long before now!

DownByTheGarden

https://www.boards.ie/discussion/comment/120514292#Comment_120514292

Thanks. I never even noticed. Love to know what they ended up paying by now though :)