Why to pay Preliminary tax?

Precedens

Hi everyone, could anyone chime in and explain why Revenue office and all tax agents urge clients to pay preliminary?

I am about to pay income tax from self employment side job, used agency to produce tax return for last year, and they advised me to pay preliminary as well. Basically same story when I was inquiring in Revenue tax office. Clerk told me it's best to pay preliminary.

Can anyone tell me why? What happens if I don't pay? It doesn't change anything after all, if I don't pay preliminary now, I will just pay next year income tax without correction (full amount minus preliminary)

What gives?

is_that_so

https://www.revenue.ie/en/self-assessment-and-self-employment/guide-to-self-assessment/what-is-preliminary-tax.aspx
What's paid this year will be set against the tax you pay for 2019 next year. It effectively becomes most of the tax for a year in your returns.

vicwatson

Precedens wrote: »

Hi everyone, could anyone chime in and explain why Revenue office and all tax agents urge clients to pay preliminary?

I am about to pay income tax from self employment side job, used agency to produce tax return for last year, and they advised me to pay preliminary as well. Basically same story when I was inquiring in Revenue tax office. Clerk told me it's best to pay preliminary.

Can anyone tell me why? What happens if I don't pay? It doesn't change anything after all, if I don't pay preliminary now, I will just pay next year income tax without correction (full amount minus preliminary)

What gives?

Agreed. Paying tax in advance is tosh.

Gontheroad

It's the law! And you will incur interest charges if you don't pay prelim.

mystic86

eh? You pay preliminary tax in November for income you earned since January, meanwhile PAYE workers have been paying tax on income earned in January back in January... so in fact it's later than everyone else... how exactly is it unreasonable?

Ally Dick

The greedy government decided to get the money in extra early. In your first year of self employment, they'll expect the money on the double in October of that year

Gooser14

Preliminary tax is paid in advance not arrears as you suggest. Preliminary tax paid in Nov 19 is on estimated earnings for the tax year 2020.

mystic86

Gooser14 wrote: »

Preliminary tax is paid in advance not arrears as you suggest. Preliminary tax paid in Nov 19 is on estimated earnings for the year 2020.

Wrong.

TitianGerm

Gooser14 wrote: »

Preliminary tax is paid in advance not arrears as you suggest. Preliminary tax paid in Nov 19 is on estimated earnings for the tax year 2020.

2019 preliminary tax is paid in 2019. It's not paid in advanced.

relax carry on

Gooser14 wrote: »

Preliminary tax is paid in advance not arrears as you suggest. Preliminary tax paid in Nov 19 is on estimated earnings for the tax year 2020.

Nope. Preliminary tax paid in 2019 is for the tax year 2019. When you file your 2018 income tax return on 31/10/19 you are due to pay whatever amount is due for 2018 (not already covered by the preliminary tax you paid in 2018). You also pay preliminary tax for the 2019 tax year at the same time.

Gooser14

relax carry on wrote:

Nope. Preliminary tax paid in 2019 is for the tax year 2019. When you file your 2018 income tax return on 31/10/19 you are due to pay whatever amount is due for 2018 (not already covered by the preliminary tax you paid in 2018). You also pay preliminary tax for the 2019 tax year at the same time.

My mistake. You are correct.