Will revenue tell you what tax you owe them?

Donald Trump

Will the Revenue ever just tell you what tax you owe (based on information you supply). Or even give you advice on same? I obviously am not referring to when they investigate you. I mean before that, before you submit your returns.


Or will they tell you to feck off and employ an accountant? I know a fella who was advised by his accountant in relation to a property swap transaction and ended up getting in fierce trouble with the revenue over it and losing the property through a forced sale so I wouldn't necessarily want to trust them 100% myself!



I know someone who had a bit of an accident abroad. They moved home but still received some on-going insurance money from their previous employer insurance scheme (even though employment had ended). They had worked in a country where there was no (or nearly zero) income tax. The insurance will apparently be grossed up somewhat to cover income taxes in Ireland. But maybe not all taxes will be covered. Probably USC or PRSI won't be covered. So that complicates things further. Plus there is the exchange rate issue as well. Even though they were being paid a fixed amount in foreign currency, the Euro equivalent fluctuated of course.



When would the deadline for such tax need to be paid? Is it considered "income" from employment? From what I understand, after tax is paid, some evidence is submitted and the insurance will reimburse. So would this reimbursement apply to the year it was received or the year it was "earned".


I'm not looking for a specific number. Just on the principal of the thing - whether you can preemptively go to them and say "will you be happy with this based on what I am telling you for inputs"

dennyk

Aren't you just going to declare another bankruptcy to evade your tax liabilities anyway? :pac:

Seriously though, yes, if you file your tax return before the end of August then Revenue will do the calculations for you and tell you what you owe. If you have an unusual tax situation, though, like your man with the insurance, you'd probably want to consult with an accountant yourself in any case to work out how to report and file properly for your specific situation, and also whether there are any options for you to reduce your tax liabilities.

Donald Trump

dennyk wrote: »

Aren't you just going to declare another bankruptcy to evade your tax liabilities anyway? :pac:

Seriously though, yes, if you file your tax return before the end of August then Revenue will do the calculations for you and tell you what you owe. If you have an unusual tax situation, though, like your man with the insurance, you'd probably want to consult with an accountant yourself in any case to work out how to report and file properly for your specific situation, and also whether there are any options for you to reduce your tax liabilities.

The Donald never declared personal bankruptcy . Moral bankruptcy is something I can't comment on.




Thanks for your response. That is interesting about August. Do you mean preliminary filing or actual filing for having them look after it?



I think that the only other spanner in the works is that the situation started back to 2018. So from what I have read and understand, they would have been supposed to file preliminary tax in 2018 as they technically spent enough time here last year to be tax resident. Spent a couple of week here on and off at start of year and finally moved back in Summer 2018.



I read (for another reason) that preliminary tax can be set to tax paid the previous year - which in this case would be zero. So maybe they would have to pay interest on this "zero" amount and do the full filing for 2018 before Oct 2019? I also read about a "split year" but then again, it might be too late to suggest that to them.



I think that the insurance scheme thing has run out for them, but that they can still claim back some, or most, of the tax due on what was received after they pay that tax. So the person wasn't trying to game the system. Sorting out the tax won't have a huge effect on them (I think...in terms of actual income I mean. The main complication is that if they pay 2018 tax this year, and reclaim that say in Dec, then that reimbursement might be considered income for 2019 rather than 2018). it was just a case of leaving it too long I think. Either that or laziness. Issue now is that if they go to do 2019 correctly, it's going to raise a red flag for 2018 so they will have to sort that one out first!



I suppose an accountant might be necessary at some stage. But it is always good to have some sort of an idea of what can and can't be done. And what should have been done. Gives an idea of what sort of questions to ask.


If they could go to Revenue now before August in relation to the 2018 (and 2019) calculations then maybe that would be the cleanest. They won't have any advice on how to reduce tax bill but maybe they could go to accountant only for that part. Because that is more simple.





I reckon maybe the closest analogy might be someone who casually starts up their own business cash-in-hand and then it takes off and they want to do things right the following year. Maybe like a hobby that starts paying. I don't know - painting pictures or some thing like that. Or like minding a child for a relative a couple of days a month one year and then the following year doing it full time. Will they get penalized harshy for retroactively correcting their first year?

dennyk

If you had more than €5k in non-PAYE taxable income in a year, you're considered a chargeable person and you're obliged to file a self-assessment (Form 11) for that tax year before October 31st of the next year, and you're also supposed to make a preliminary payment of your estimated tax owed by October 31st of the actual tax year (e.g. for tax year 2018, you should have paid preliminary payment by October 31st 2018, and you have until October 31st 2019 to file your 2018 Form 11). If you didn't pay or underpaid your preliminary tax, Revenue may charge you interest at 0.0219% per day (about 8.3% per year), so it shouldn't be a massive penalty unless you really owed a lot of tax. They may not even bother at all if the amount is small; I missed the preliminary payment deadline for a small amount of CGT one year and they never said anything and just billed me for the actual tax owed after I filed my Form CG1.

If you file your Form 11 before August 31st of the year it's due (the year after the tax year in question), Revenue will use the information you submitted to calculate your tax liability for that year and will let you know how much remaining tax you owe (or how much you've overpaid, if your preliminary payment ends up being too much instead of too little).

Generally Revenue aren't going to be difficult to deal with if you are preemptively coming to them to correct a previous honest mistake and you're willing to pay what you owe; it's when they have to chase after you that things can become problematic.

Donald Trump

Cool. Thanks for that. Very helpful. A lot of info there that I did not know.

On the penalty for the preliminary tax, would it be the case that the preliminary tax could or should have been zero given that the person had no tax liability the previous year due to being abroad for years? Would that hold any water? How does it work for a person who say starts up a business in year 1 when the business didn't exist the previous year?


Without giving too much of their details away, this is part of a couple I know who moved abroad to save money and have now come back and are considering buying a house. I get the impression that last year they didn't really care that much about sorting things out. They had been earning basically tax free where they were so there was nothing like that to deal with for years. They just returned back and money kept flowing into their foreign account. They will be transferring a large sum back home to pay for (a large part of) the house. They assume that a large transfer like that will flag them on a radar somewhere. The savings are fine - they obviously have record of earning it. But if they are investigated, that might uncover the insurance income from last year.......if they had stayed abroad a few weeks extra I think they might have been able to have been less than 183 days in the country last year and it wouldn't have been a worry. I gather the insurance income would have been in the region of 30-40k for the portion of the year they were home. So I suppose then they need to figure out whether to calculate the tax due as if that number was the income for the year, or whether the income was that amount grossed up. And I assume they can do the split year thing too.

8.3% would still be sore. It would still annoy me if it were me to be honest. But if I was them and could get away with submitting a form with 0 now for preliminary tax based on previous year, then fixing it up in August, I'd probably recommend them to do that myself. Would save the worry of being "found out" later on. Especially as they will get a portion of the tax reimbursed by the same insurance

dennyk

Honestly, they need to consult with an accountant, because their situation is rather complicated. Depending on the nature of this insurance payout, it might not be subject to tax in Ireland at all. If it is subject to tax, their liability may depend on other factors such as their domicile and when they remitted the money in question to Ireland. In addition, if they were tax-resident in Ireland due to spending more than 183 days here, they'd generally be liable for tax on all of their worldwide income for the entire tax year, not just during the time they were physically present here, including any income from their employment abroad during that year (though their liability might be reduced by double taxation treaties or credits for any foreign taxes paid).

The good news is that if 2018 was their first year of being a chargeable person for self-assessment, they probably won't be charged any interest if they choose to pay their preliminary tax based on 100% of the prior year's tax due. Again, though, consulting with an accountant to determine their status and the best course of action is the way to go.

Donald Trump

dennyk wrote: »

Honestly, they need to consult with an accountant, because their situation is rather complicated. Depending on the nature of this insurance payout, it might not be subject to tax in Ireland at all. If it is subject to tax, their liability may depend on other factors such as their domicile and when they remitted the money in question to Ireland. In addition, if they were tax-resident in Ireland due to spending more than 183 days here, they'd generally be liable for tax on all of their worldwide income for the entire tax year, not just during the time they were physically present here, including any income from their employment abroad during that year (though their liability might be reduced by double taxation treaties or credits for any foreign taxes paid).

The good news is that if 2018 was their first year of being a chargeable person for self-assessment, they probably won't be charged any interest if they choose to pay their preliminary tax based on 100% of the prior year's tax due. Again, though, consulting with an accountant to determine their status and the best course of action is the way to go.

Hmmm. The more than 183 days probably complicates things. My understanding is that a fair chunk was also given in severance at the end of contract. Or it might have been pension contribution payout or something. Either way I get the impression they got enough on top of their past savings to bring them up to house-buying level of cash. Would be terrible to get stung for that! The insurance income thing is not so bad as there is some scope for that to be "reimbursed". I think that basically, the insurance thing is supposed to effectively pay an amount which results in a fixed after-tax amount of X (although only income tax reimbursed)



I thought the split-year thing was straightforward if you were either returning from living abroad for years (or leaving mid-way through year to go away).



As this is so complicated, I'd guess they'd be looking at a fair few accountant hours. Can those expenses be put against your income/tax bill?

Donald Trump

What would Revenue ask in terms of questions in any case if a flag was raised? Is it a case that the offshore savings should be disclosed immediately upon return? I mean it's not Panama papers kind of thing. Money was earned legitimately abroad, not sent abroad to be hidden.
If they transferred say 200k savings back and Revenue said "hey, where did you get that" could they not just say "well here's my 5 years of payslips". The main hiccup is the insurance bit which continued to pay the wages, or at least a proportion of them even though their contract had ended. If that hadn't been there and they just moved back, I'd assume they'd have had nothing to do

Is it like you are assumed guilty until you can prove your innocence? Or do you just have to show a valid source of income and when you earned if? Or am I mixing that up with a "proceeds of crime" sort of scenario

Obviously I'm not asking or suggesting any kind of evasion scenario. Just wondering. Are they leaving themselves open to being taxed on the whole lump sum even though most of it was built up when not tax resident. Actually I'd imagine most of what they got through insurance thing probably went on repatriation and other expenses anyway. I think their shipping home of stuff was expensive! Or maybe that lump sum at the end of contract was for things like that.

dennyk

Accountancy fees directly related to a business can be deducted from business profits in the case of self-employment, but I don't think they are deductible from income for individual taxpayers who have other non-PAYE income sources. The accountant may be able to help them find ways to minimize their tax liabilities that would more than make up for their fees, though, and it would also provide peace of mind that they are fully compliant and aren't going to have to worry about being hit with large penalties or fines (or worse) in the future should Revenue catch up with any potential delinquencies.

As far as audits and investigations by Revenue, I've no experience with them myself, but it's my understanding that when conducting an audit, Revenue will initially notify the taxpayer of the audit and give them the opportunity to make a voluntary disclosure; if the taxpayer does so and fully and promptly cooperates with the auditors, they may reduce the penalties applied and, if the issue was not a case of deliberate tax evasion and/or the amount in question wasn't enormous, then Revenue might not seek criminal prosecution.

There isn't a presumption of guilt in an audit; it's usually conducted because Revenue has seen something indicating that a taxpayer may be out of compliance and is therefore investigating further to determine whether that is in fact the case. (Some audits are also conducted on randomly chosen taxpayers from time to time, so there's a small chance you might be audited even though there is no sign of an issue with your returns.) Should they be audited, it would obviously be to their benefit if they can promptly provide evidence of full compliance with Irish tax law, e.g. proof of where any funds in question originated and an explanation as to why they believe those funds aren't subject to Irish taxes. If they are audited, they should definitely consult an accountant, without question, even if they believe they are fully compliant, as professional advice will benefit them greatly in that situation.