Help this dumb b!!

Username2017 · 07-08-2020 7:55pm #1

Hey can someone help me , I own a house , rent it out and I live in the U.S. I’ve rented it out since June 2018. I’m only now trying to pay my taxes since I am home for 2 weeks . I registered on revenue.ie but it’s sooo confusing. I’m a dumb bitch when it comes to taxes!! I’ve Registered with PRTB from 2018. I read something about receiving tax relief against the interest on the mortgage? What does that even mean?! Should I go speak to the bank and see how much interest I pay each year? Revenue is asking for tenants ppsn number and amount of tax withheld by tenants?! Help 😭

antix80 · 07-08-2020 7:59pm

Depends.. Are you living and working in the US and planning to stay there or what's the story?
Sincerely doubt your tenants are paying withholding tax unless you told them to.

Username2017 · 07-08-2020 8:03pm

Ok thanks that helps! Yea I live and work in America and don’t plan on moving home anytime soon.

dennyk · 07-08-2020 10:40pm

If you live abroad, if the rent is paid directly to you, your tenant is supposed to withhold 20% of the rent amount and submit that to Revenue on your behalf. See here for more detail. If they haven't been doing this, you must inform them of their obligation immediately and they must start making these deductions and remittances starting from their next rent payment. As such, they will only be paying you 80% of the rent owed, and the other 20% they will be paying directly to Revenue (or having it taken out of their tax credits, depending on the amount), so be prepared for the reduced cash flow.

You will need to settle up with Revenue directly for the tax you actually owe for the past couple years. Expect to pay some penalties and interest for your failure to file and pay on time.

For your deductions, see this page for an explanation of the deductions that are allowed. For your mortgage interest, your monthly statements from your bank should detail the amount of each payment that's put towards interest each month; you can total those up for each tax year to get the amount you can deduct from 2019 onward. For 2018 and earlier, you cannot deduct the full amount of interest; see the document above for the amounts that can be deducted for those years. Deductions can only be made for interest accrued while a tenant was in the property, or the time between two tenancies as long as you didn't occupy the property during that time, but not from before the first tenancy began.

Once your tenant starts their proper rent withholding, you'll likely have more withheld each year than you'll actually owe in tax after your deductions; you'll need to file a Form 11 tax return each year with Revenue, on which you'll claim the tax the tenant deducted (which they should report to you each year using Form R185) and your own expense deductions, and you'll be issued a refund for any excess withholding (assuming you don't have any other taxable income which you must pay tax on in Ireland, of course).

Username2017 · 07-08-2020 11:17pm

Oh wow thank you so much! When you say contact the revenue do you mean I should call them and talk to them? I have an estate agent who deal with the tenants but they do pay the rent to my Irish bank account. I wonder why he never mentioned this to me or them ?! He knows I live abroad. Anyway I really appreciate your knowledge thank you

Gumbo · 08-08-2020 12:09am

Username2017 wrote: »

Oh wow thank you so much! When you say contact the revenue do you mean I should call them and talk to them? I have an estate agent who deal with the tenants but they do pay the rent to my Irish bank account. I wonder why he never mentioned this to me or them ?! He knows I live abroad. Anyway I really appreciate your knowledge thank you

Because he’s an estate agent, not a tax adviser. It’s up to you to sort your tax affairs.

relax carry on · 08-08-2020 12:19am

Username2017 wrote: »

Hey can someone help me , I own a house , rent it out and I live in the U.S. I’ve rented it out since June 2018. I’m only now trying to pay my taxes since I am home for 2 weeks . I registered on revenue.ie but it’s sooo confusing. I’m a dumb bitch when it comes to taxes!! I’ve Registered with PRTB from 2018. I read something about receiving tax relief against the interest on the mortgage? What does that even mean?! Should I go speak to the bank and see how much interest I pay each year? Revenue is asking for tenants ppsn number and amount of tax withheld by tenants?! Help ðŸ˜

It's really not that difficult. Take a few minutes to read what your tax responsibilities are and do it yourself or go find an accountant and pay them to do it.

https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-45/45-01-04.pdf

dennyk · 08-08-2020 12:29am

Username2017 wrote: »

Oh wow thank you so much! When you say contact the revenue do you mean I should call them and talk to them?

You can, yes; I haven't called them myself, but I've heard they are generally fairly helpful over the phone.

You'll most likely need to register for ROS if you haven't already, and use that system to file your Form 11 for the years you had rental income. You'll also use that going forward for your future tax returns each year as well.

You will most likely have to pay a penalty and interest for your late filings, but they aren't likely to pursue a criminal prosecution if you're the one coming to them to fix things unprompted; those are generally reserved for deliberate, habitual, and uncooperative tax evaders, not people who were just negligent about filing their taxes properly.

Treppen · 08-08-2020 12:36am

relax carry on wrote: »

It's really not that difficult. Take a few minutes to read what your tax responsibilities are and do it yourself or go find an accountant and pay them to do it.

https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-45/45-01-04.pdf

You can write off a portion of the accountants fees against your return too.

An accountant could end up saving you a bucket in the long run. But yould want to have paperwork handy to speed up the process.

I think the deadline for 2019 returns is October 2020 but not sure.

Username2017 · 08-08-2020 12:39am

Ok I’ll call them Monday morning and beg for mercy!

Username2017 · 08-08-2020 12:43am

Thanks treppen an old client of mine is an accountant I think I’ll contact her too to get me out of this mess, I go back to America in a week so I was trying to just figure it out myself but I’m stressed out!

Mrs OBumble · 08-08-2020 1:08am

Username2017 wrote: »

.... since I am home for 2 weeks . I registered on revenue.ie but it’s sooo confusing. .... Should I go speak to the bank ...

No, you should not go anywhere. Please stay wherever you are self-isolating and do everything by phone.

Retain an accountant, and authorise them to deal with Revenue for you.

Username2017 · 08-08-2020 1:40am

Mrs OBumble wrote: »

No, you should not go anywhere. Please stay wherever you are self-isolating and do everything by phone.

Retain an accountant, and authorise them to deal with Revenue for you.

I’ll be out of self isolation on Tuesday so I’ll have 3 days of freedom, hence why I was trying to figure this out by myself. Thanks though

handlemaster · 08-08-2020 7:15am

OP get an accountant and save yourself the pain and hassle

P.s. are you self isolating for the two weeks then going back ?

Pawwed Rig · 08-08-2020 7:21am

Revenue (in general) have suspended most of their phone lines during the pandemic so you may need to deal with them electronically. If you go to ROS and register a 'myaccount' there may be an option to contact them through that.

I assume there are no US tax issues?? They tend to want to tax everything but it will depend on your individual status

JJJackal · 08-08-2020 11:00am

Username2017 wrote: »

I’ll be out of self isolation on Tuesday so I’ll have 3 days of freedom, hence why I was trying to figure this out by myself. Thanks though

I agree with previous posters re accountant esp as you dont live in Ireland - much easier to get an accountant to deal with it all going forward

Treppen · 08-08-2020 12:47pm

Username2017 wrote: »

Thanks treppen an old client of mine is an accountant I think I’ll contact her too to get me out of this mess, I go back to America in a week so I was trying to just figure it out myself but I’m stressed out!

Ya look I only do a few self employed hours every year and get an accountant to do a review (he includes my wife also). Costs about €400 but get tax relief on that and saves a bucket of time dealing with revenue. I use taxassist.com , I'm not affiliated in any way. You get a few face to face meetings and a breakdown explained afterwards.Just stress that it's for non resident renting a property.

I'd be wary of getting friends/ex client involved it'll be a grey area as to whether they are doing you a favour or treating you as a client... Thus you might find you'll be put on the long finger till the last week of returns deadline, then if you start ringing they'll get uppity because "they're doing you a favour". Plus if they do it for a discount and something goes wrong they'll probably wash their hands of you.

As a long term non resident you'll need a lot of advice too as it might bite you in the *** in the long run.

Browney7 · 08-08-2020 1:59pm

OP, I'd advise against ringing Revenue and giving them information you necessarily don't need to give or to incriminate yourself further. Engage an accountant and preferably one that has some knowledge of property taxation for overseas residents like yourself.

If the tenants are paying an Irish bank account they could have a legitimate argument they had no clue you lived outside the state unless you've categorically stated in a lease your overseas address.

I'd also recommend a US tax professional to ensure you are compliant with uncle Sam and claiming all allowable deductions.

Username2017 · 08-08-2020 11:45pm

Browney7 wrote: »

OP, I'd advise against ringing Revenue and giving them information you necessarily don't need to give or to incriminate yourself further. Engage an accountant and preferably one that has some knowledge of property taxation for overseas residents like yourself.

If the tenants are paying an Irish bank account they could have a legitimate argument they had no clue you lived outside the state unless you've categorically stated in a lease your overseas address.

I'd also recommend a US tax professional to ensure you are compliant with uncle Sam and claiming all allowable deductions.

I hear ya , I’m speaking with the accountant tomorrow so I’ll have a better idea then , thank you!

Username2017 · 09-08-2020 12:04pm

Thanks everyone. Ok so I have an accountant , do I fill out the form 11 or does the accountant ? What should I have prepared for them? I have all my expenses and receipts for what I can claim back on.

Pawwed Rig · 09-08-2020 12:06pm

Username2017 wrote: »

Thanks everyone. Ok so I have an accountant , do I fill out the form 11 or does the accountant ? What should I have prepared for them? I have all my expenses and receipts for what I can claim back on.

They are not much of an a accountant if you still have these questions. I would call them back to clarify any further issues you have.

Username2017 · 09-08-2020 12:56pm

Pawwed Rig wrote: »

They are not much of an a accountant if you still have these questions. I would call them back to clarify any further issues you have.

I am speaking to her until tomorrow , I’m trying to have everything ready for her.

Pawwed Rig · 09-08-2020 1:38pm

Just have your figures ready. If it is above board you will also be asked for picture ID and 2 proofs of address. The accountant will then issue a formal letter of engagement that you will sign and return to her.
You will need to be registered for tax so the accountant will provide you with a Form TR1 to sign.
When all the admin is done she can prepare your return. All you should have to do is review the completed Form 11 and then sign it.
Everything on the form should have a paper trail. This is up to you rather than the accountant.
Your accountant will not assess your US tax liabilities at all so that is up to you to determine.

TSQ · 09-08-2020 4:08pm

dennyk wrote: »

If you live abroad, if the rent is paid directly to you, your tenant is supposed to withhold 20% of the rent amount and submit that to Revenue on your behalf. See here for more detail. If they haven't been doing this, you must inform them of their obligation immediately and they must start making these deductions and remittances starting from their next rent payment. As such, they will only be paying you 80% of the rent owed, and the other 20% they will be paying directly to Revenue (or having it taken out of their tax credits, depending on the amount), so be prepared for the reduced cash flow.

You will need to settle up with Revenue directly for the tax you actually owe for the past couple years. Expect to pay some penalties and interest for your failure to file and pay on time.

For your deductions, see this page for an explanation of the deductions that are allowed. For your mortgage interest, your monthly statements from your bank should detail the amount of each payment that's put towards interest each month; you can total those up for each tax year to get the amount you can deduct from 2019 onward. For 2018 and earlier, you cannot deduct the full amount of interest; see the document above for the amounts that can be deducted for those years. Deductions can only be made for interest accrued while a tenant was in the property, or the time between two tenancies as long as you didn't occupy the property during that time, but not from before the first tenancy began.

Once your tenant starts their proper rent withholding, you'll likely have more withheld each year than you'll actually owe in tax after your deductions; you'll need to file a Form 11 tax return each year with Revenue, on which you'll claim the tax the tenant deducted (which they should report to you each year using Form R185) and your own expense deductions, and you'll be issued a refund for any excess withholding (assuming you don't have any other taxable income which you must pay tax on in Ireland, of course).

So what happens if the tenant pays the landlord 80% of the rent, but doesnt pay the 20% due to Revenue? Who is responsible for the unpaid tax?

dennyk · 09-08-2020 5:39pm

TSQ wrote: »

So what happens if the tenant pays the landlord 80% of the rent, but doesnt pay the 20% due to Revenue? Who is responsible for the unpaid tax?

The tenant is responsible in that case. That's the whole point of the rule; it's much easier (and cheaper) for Revenue to pursue a domestic tenant for the unpaid taxes than to pursue a landlord who's living abroad (possibly not even in the EU).

Technically the tenant is also responsible even if they've been paying the landlord 100% of the rent, if they were aware that the landlord lived overseas and that they were paying the landlord directly, but that would no doubt be a much messier situation, as the tenant might just plead ignorance and it'd be much harder to prove whether or not they were aware of the landlord's status or whether the landlord actually informed them about their obligation. If the tenant was withholding the tax from their rent payments but not remitting it to Revenue, that's much more cut and dried.

Pawwed Rig · 09-08-2020 5:52pm

I would ignore the tenant withholding tax rule. I have never seen in enforced by Revenue and even if it were to be enforced it could be sorted out at that point in time by way of a lump sum (ie that months rent). It will just unduly complicate matters to try to get tenants involved in the landlords tax matters.

Stupid law tbf.

Claw Hammer · 10-08-2020 11:57am

Pawwed Rig wrote: »

I would ignore the tenant withholding tax rule. I have never seen in enforced by Revenue and even if it were to be enforced it could be sorted out at that point in time by way of a lump sum (ie that months rent). It will just unduly complicate matters to try to get tenants involved in the landlords tax matters.

Stupid law tbf.

From the 1998 Ombudsmans report. Justr because the law is stupid doesn't mean it isn't enforced.

Since 1969 it has been a requirement of Irish tax
law that a person paying rent to a non-resident
landlord should deduct income tax at the standard rate from the gross rental income and pass
on the deduction to the Revenue Commissioners.
This form of withholding tax applies both in the
case of residential and commercial property
rental. My complainant, probably like the vast
majority of people, was quite unaware of this
provision. In early 1998 she became aware of her
possible entitlement to income tax relief on rent
paid and she applied to the Inspector of Taxes for
this relief. The Inspector notified her that she
was due a tax refund in respect of rent paid
totalling £265 for the years 1996/7 and 1997/8.
However, the Inspector also informed her that, as
her landlord resided outside the state, she (the
tenant) should have been withholding income tax
from the rent being paid. Where such tax is not
withheld, the tenant is liable for payment of the
tax instead. Accordingly, the Inspector told my
complainant that she owed an amount of £801
for the years 1996/7 and 1997/8 which, after
deduction of the tax relief otherwise due to her,
meant that she owed a net amount of £536.

Pawwed Rig · 10-08-2020 12:48pm

Given that the best case you could come up with was 22 years ago I think it proves my point.

Either way it is nothing that the OP needs to worry about as it is not her obligation.

Claw Hammer · 10-08-2020 5:15pm

Pawwed Rig wrote: »

Given that the best case you could come up with was 22 years ago I think it proves my point.

Either way it is nothing that the OP needs to worry about as it is not her obligation.

When did the law change? It can be and has been enforced? It is very foolish to assume that it won't be.

circular flexing · 10-08-2020 6:46pm

Claw Hammer wrote: »

When did the law change? It can be and has been enforced? It is very foolish to assume that it won't be.

Sample size of one but my tenants never withheld the tax and were never chased up about it. I rented out a house for 5 years while living overseas.

If the rent is being paid to an Irish bank account I'm not sure this rule even applies.

Pawwed Rig · 10-08-2020 8:22pm

circular flexing wrote: »

Sample size of one but my tenants never withheld the tax and were never chased up about it.

Noone ever is and as I said it is not the OPs problem anyway. Once she files returns the issue will never arise

Help this dumb b!!

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