How to Choose the Right Accounting Firm?

[Deleted User] · 07-03-2021 11:30am

Of course, I appreciate the work that accountants do, and how challenging it must be to become a competent authority in the area. But as I said, my questions are more about trying to understand the entire process involved - and that means coming to understand typical fees for the kind of work that I require.

A poster above mentioned dividends and salary. What's the difference?

Say for example this year I earn 125k (though I anticipate it will be 30-40k higher by the end of the year), and that works out at 10,400 per month.

Clearly, I still need to take money out each month to account for rent/bills/living etc. Is any extraction of funds taken as dividends or salary in this case? And what are the implications of either.

Thanks again for the advice/information detailed so far, as I'm rapidly picking things up.

Pawwed Rig · 07-03-2021 11:41am

Well I guess my point above is that if you hire a builder do you insist on understanding exactly what he is doing or do you agree a price and leave him at it? It is not something you are going to get a full handle on by a brief discussion here. There are courses you can do if you are really interested in it but this is not what you are good at though. You are good at working at your own business and building that income so focus on that and let the accountant do what he does.

Dividends are passive income and are not deductible for CT. Salary is active and is deductible. It is also personable. It is a no brainer to take salary instead of dividend but you may not have a choice if you have a close company issue.

[Deleted User] · 07-03-2021 11:47am

Pawwed Rig wrote: »

Well I guess my point above is that if you hire a builder do you insist on understanding exactly what he is doing or do you agree a price and leave him at it? It is not something you are going to get a full handle on by a brief discussion here. There are courses you can do if you are really interested in it but this is not what you are good at though. You are good at working at your own business and building that income so focus on that and let the accountant do what he does.

Dividends are passive income and are not deductible for CT. Salary is active and is deductible. It is also personable. It is a no brainer to take salary instead of dividend but you may not have a choice if you have a close company issue.

So if a salary is taken each month, this is taxed at the same time?

If it were 4,000 euros, to take a random sum, would that be taxed immediately before I get it?

In terms of demanding explanations, no - I don't. I guess that's why it's important to get multiple quotes.

Pawwed Rig · 07-03-2021 11:52am

Your salary is done via payroll and is taxed at source as your accountant advised. Dividends suffer 25% DWT which you get a credit for in your Form 11.
Your salary might be restricted but your dividends aren't (to the extent that you have distributable reserves).

[Deleted User] · 07-03-2021 11:59am

Pawwed Rig wrote: »

Your salary is done via payroll and is taxed at source as your accountant advised. Dividends suffer 25% DWT which you get a credit for in your Form 11.
Your salary might be restricted but your dividends aren't (to the extent that you have distributable reserves).

I can't get my head around it though.

If the salary is 1,000, then what tax will be taken from it?

And if it is 4,000, what's the tax taken from it?

I don't really understand what tax rates are applicable? Is it a case of a salary is decided at the beginning for the entire year, that way it's known what taxes apply each month?

tanit · 07-03-2021 12:04pm

Deleted User wrote: »

Of course, I have the work that accountants do, and how challenging it must be to become a competent authority in the area. But as I said, my questions are more about trying to understand the entire process involved - and that means coming to understand typical fees for the kind of work that I require.

A poster above mentioned dividends and salary. What's the difference?

Say for example this year I earn 125k (though I anticipate it will be 30-40k higher by the end of the year), and that works out at 10,400 per month.

Clearly, I still need to take money out each month to account for rent/bills/living etc. Is any extraction of funds taken as dividends or salary in this case? And what are the implications of either.

Thanks again for the advice/information detailed so far, as I'm rapidly picking things up.

Dividends would be considered passive income and get a different tax treatment, different reliefs/tax credits, etc. Salary is earned income. Ideally for your day to day expenses you would extract the money via salary.

The amount of work like other and I said in the thread is going to depend on the amount of bookkeeping and the complexity of the accounts along with considerations about all your income sources and where that income is being generated:

How many transactions are taking place?,
Do they relate to goods or services?
Are you dealing with transactions outside Ireland (for instance do your transactions take place in NI, UK, EU or other countries in the world, etc)?
Do you need customs related information for the transactions that are taking place outside the EU? (please notice that NI has a very, very special relation with the EU now and Great Britain is no longer in the EU)
Do you have specific tax needs (dividends, income passive/earned from other countries?
With the level of income/turnover you say you have how come you did not have an accountant until now, do you have outstanding returns, information that need to be submitted to Revenue? Are you expecting a Revenue contact/visit, etc?
Do you regularly drop records requested by your accountant as requested (without forgetting records, bank accounts, assets that need to be added to the accounts, etc) and do you drop them on time?
And how much of that bookkeeping is being done by yourself and how much the accountant it would need to do, not to speak of how many adjustments would need to be done along with how many times you are going to make the accountant go back to you requesting information and how long if would take you to answer

And this is just the beginning, without knowing your specific situation it is impossible to quantify the amount of hours it would take. You can only be given an estimate based on the information you are providing and if you are not providing full details the accountant will come back telling you that they need to issue an extra invoice for the additional services provided.

Like other people have told you in the thread, talk with other accountants, get more quotes from them. Trying to know the amount of hours it can take without having full details would be impossible for anyone in this thread.

tanit · 07-03-2021 12:07pm

Deleted User wrote: »

I can't get my head around it though.

If the salary is 1,000, then what tax will be taken from it?

And if it is 4,000, what's the tax taken from it?

I don't really understand what tax rates are applicable? Is it a case of a salary is decided at the beginning for the entire year, that way it's known what taxes apply each month?

This might help about the issue of PAYE, "What is PAYE?"

If you want to educate yourself more about the topic in the Revenue website
Jobs and pensions

Pawwed Rig · 07-03-2021 12:07pm

[Deleted User] wrote: »

I can't get my head around it though.

If the salary is 1,000, then what tax will be taken from it?

And if it is 4,000, what's the tax taken from it?

I don't really understand what tax rates are applicable? Is it a case of a salary is decided at the beginning for the entire year, that way it's known what taxes apply each month?

It depends on your personal circumstances which your accountant will go through with you. I don't know what credits/SRCOP etc you have. Also I am still not even sure if you have a trade so could not advise on it.

You are the Director so you decide your salary.

relevanc · 07-03-2021 12:12pm

[Deleted User] wrote: »

So if a salary is taken each month, this is taxed at the same time?

If it were 4,000 euros, to take a random sum, would that be taxed immediately before I get it?

In terms of demanding explanations, no - I don't. I guess that's why it's important to get multiple quotes.

All these questions are best discussed with your accountant. That’s what they’re there for.

Would you go on an Internet forum to receive detailed medical advice or make an appointment to see your doctor?
No body here knows enough about your business to give meaningful advice. Accountants/tax advisors have spent years training towards their profession so as to do it well and make a living from it.

[Deleted User] · 07-03-2021 12:28pm

To answer your questions:

tanit wrote: »

The amount of work like other and I said in the thread is going to depend on the amount of bookkeeping and the complexity of the accounts along with considerations about all your income sources and where that income is being generated:
How many transactions are taking place? 250 per month.

Do they relate to goods or services? Services.

Are you dealing with transactions outside Ireland (for instance do your transactions take place in NI, UK, EU or other countries in the world, etc)? Yes, all over the world.

Do you need customs related information for the transactions that are taking place outside the EU? (please notice that NI has a very, very special relation with the EU now and Great Britain is no longer in the EU). No.

Do you have specific tax needs (dividends, income passive/earned from other countries? No.

With the level of income/turnover you say you have how come you did not have an accountant until now, do you have outstanding returns, information that need to be submitted to Revenue? Are you expecting a Revenue contact/visit, etc? I did self-assessment in the past living in other countries.

Do you regularly drop records requested by your accountant as requested (without forgetting records, bank accounts, assets that need to be added to the accounts, etc) and do you drop them on time? I will do, as requested.

And how much of that bookkeeping is being done by yourself and how much the accountant it would need to do, not to speak of how many adjustments would need to be done along with how many times you are going to make the accountant go back to you requesting information and how long if would take you to answer. I'll be doing none of it, that's for sure![/B]

ari101 · 07-03-2021 12:53pm

Generally people set a salary to maximise their lower rate tax bands at a minimum.
They look at how much cash they need to live life. An accountant properly familiar with your details can advise on the gross salary needed to generate an particular net. If you want a basic idea of net, put the numbers from your tax credit cert and a possible gross figure into an online tax calculator.
If there is an excess income after desired salary and expected other expenses, then people may choose to set up a company pension. Employer pension contributions are a fabulously tax efficient way to reduce corp tax, you just need to realise the money is tied up.
Leaving cash / profit in the business may have long term benefits for reliefs as mentioned before, but also may result in close company surcharge, which is generally where a annual dividend might arise to avoid this non refundable tax.
3.5k sounds good based on what you are doing/getting, but meet with a couple of other accountants to find the someone you feel most comfortable with, whose explanations you understand best and who you feel gives you the most value.

relevanc · 07-03-2021 1:22pm

OP are you VAT registered?
From your description it seems likely that VAT on e-services rules may apply (again we don’t know the nuances of your business).
By passive income I assume the supply of the e-learning service requires no human input?
Are these B2B or B2C supplies?
Have you been charging/filing VAT correctly on your worldwide supplies of services?

Also you stated that you have filed tax returns in other jurisdictions?
All these are further complications in what you perceive to be a simple matter

[Deleted User] · 07-03-2021 1:42pm

relevanc wrote: »

OP are you VAT registered?
From your description it seems likely that VAT on e-services rules may apply (again we don’t know the nuances of your business).
By passive income I assume the supply of the e-learning service requires no human input?
Are these B2B or B2C supplies?
Have you been charging/filing VAT correctly on your worldwide supplies of services?

Also you stated that you have filed tax returns in other jurisdictions?
All these are further complications in what you perceive to be a simple matter

No, not VAT registered.

I'm assuming this is something the accountant will bring up, if it applies.

e-learning services that don't require human input; though I can enhance that by working on social media. So, I'm not quite sure where it falls into.

B2C.

Have you been charging/filing VAT correctly on your worldwide supplies of services?

In previous tax returns, no. I simply filed for self-assessment on my entire income and that's all (in other jurisdictions where I lived).

tanit · 07-03-2021 1:48pm

Okay first of all, I would recommend that any information that you provide in this and any other forum would be generic and that no personal or financial information, in relation to yourself or your business activities, is provided.

With the amount of transactions, and considering you are talking about services all over the world, and that is going to possibly involve things like Vat via the One Stop Shop (once you go over thresholds in each EU country you might be operating) and other transactions with specific tax knowledge you are getting a good quotation.

You would need to make sure that the firm you are using has experience in these types of dealings, or they know specialist firms that can provide assistance for any international tax issues, so that they can outsourced the parts that cannot be done inhouse.

Do you have specific tax needs (dividends, income passive/earned from other countries? No.

You DO have specific tax needs
3,000 it is starting to look very cheap, the firm you need would need tax advisors and tax specialists. I am sorry to tell you but you do not have a simple tax structure and you do need proper tax advice if you are in a growing stage in your business. The moment you start having international transactions that go beyond the odd dividends or rental income from other countries, it becomes complicated and depending on thresholds you might need to go beyond One Stop Shop for VAT (this applies to EU countries, you might have other Vat/Sales tax requirements depending on the countries you trade on along with other tax requirements on those countries, etc.)

I don't know how long you have been trading but you do need a firm with tax specialist and good knowledge on International Taxes to make sure you do not get into trouble. Right now it could be an issue of being able to do everything in-house but you might need more specialist knowledge from the International tax point of view.

Again I recommend you to talk with more firms and ask about their knowledge in your specific transactions. And definitely get an accountant because you need proper advice. You do not need a regular accountant, you need someone with specialist knowledge. You do not go to a GP when you are dealing with the possibility of something bigger, they will refer you to a specialist and this is the same.

[Deleted User] · 07-03-2021 2:14pm

tanit wrote: »

Again I recommend you to talk with more firms and ask about their knowledge in your specific transactions. And definitely get an accountant because you need proper advice. You do not need a regular accountant, you need someone with specialist knowledge. You do not go to a GP when you are dealing with the possibility of something bigger, they will refer you to a specialist and this is the same.

Thanks for raising this matter; it's not something I thought of nor was I aware about.

But I'll discuss this matter with an accountant familiar with my case.

relevanc · 07-03-2021 2:32pm

[Deleted User] wrote: »

Thanks for raising this matter; it's not something I thought of nor was I aware about.

But I'll discuss this matter with an accountant familiar with my case.

The fact that you haven’t considered VAT and have been trading 4 years is honestly worrying.
Again your tax situation is complex

Edited to add: highly likely that any self assessments filed in other jurisdictions have been filed incorrectly.
Especially considering you have likely exceeded the vat threshold

[Deleted User] · 07-03-2021 2:53pm

relevanc wrote: »

The fact that you haven’t considered VAT and have been trading 4 years is honestly worrying.
Again your tax situation is complex

Edited to add: highly likely that any self assessments filed in other jurisdictions have been filed incorrectly.
Especially considering you have likely exceeded the vat threshold

I honestly didn't even think about it.

I thought VAT applied to physical goods, rather than online information products/courses.

How does VAT significantly impact my taxation?

Pawwed Rig · 07-03-2021 4:38pm

Deleted User wrote: »

I honestly didn't even think about it.

I thought VAT applied to physical goods, rather than online information products/courses.

How does VAT significantly impact my taxation?

If an assessment is raised against you it could be significant. You are liable to remit VAT not your customers

[Deleted User] · 07-03-2021 4:50pm

Pawwed Rig wrote: »

If an assessment is raised against you it could be significant. You are liable to remit VAT not your customers

Significant in what extent?

Fines, incarceration?

Pawwed Rig · 07-03-2021 4:59pm

Deleted User wrote: »

Significant in what extent?

Fines, incarceration?

I don't know enough about your case and we are probably (hopefully) jumping the gun here but your case is sounding more and more complicated so again there is not much that we can do for you here without the full facts.

tanit · 07-03-2021 5:04pm

Deleted User wrote: »

I honestly didn't even think about it.

I thought VAT applied to physical goods, rather than online information products/courses.

How does VAT significantly impact my taxation?

Okay you not only have a complicated tax situation but there is a great likelihood that you may need to make disclosures depending on the level of turnover you had in Ireland and outside Ireland and whether any of the Vat exemptions might apply to the services you provide.

Vat applies in Ireland on Services for turnover in Ireland of over 37,500, you may or may not qualify for the exemptions for Education services depending on the kind of courses you are providing. Courses for recreational purposes DO need to charge Vat as they do not qualify for instance. I do not know the situation about these services outside Ireland in other EU countries and in other EU countries you would need to register once you go over the thresholds most of them 35,000 Euros, Germany, Luxembourg and the Netherlands 100,000. Below that you have the One Stop Shop and the rules for the One Stop Shop are changing this year in July again so your situation may be affected again depending on the thresholds and if the services you sell online qualify for exemptions or not.

VAT Treatment of Education and Vocational Training

You really need to have a long talk with full details about your sales in and out of Ireland and the EU to see where you stand and if it is just a question of extra paperwork that needs to be done or a full disclosure and the sooner the better. Seriously get an accountant with specialist tax knowledge.

tanit · 07-03-2021 5:05pm

Pawwed Rig wrote: »

I don't know enough about your case and we are probably (hopefully) jumping the gun here but your case is sounding more and more complicated so again there is not much that we can do for you here without the full facts.

I totally agree with this

gudede · 07-03-2021 11:18pm

I viewed the first page and then gave up.

I can see a couple of things;
1) you don’t trust your accountant,
2) the conversation between yourself and accountant wasn’t great,
2) you’re defo the type of client, thats on the phone once a week but don’t want to pay the fees. “C” grade client.

Yes, some fees might seem expensive and others can do the work for cheaper, but remember you get what you pay for.

Incorporating just to save on taxes might not be the best idea. What’s your exit plan? Keep trading till your pension age? Build business and sell in 5-10 years. Are you married, kids etc. All these things + others should be considered.

Ps - you’re also in Dublin. I.e you must pay Dublin tax. You could get an accountant down South.

Jim2007 · 07-03-2021 11:56pm

Deleted User wrote: »

What is the usual strategy for someone earning 125k +?

Surely giving 49pc to the government just seems awful. Obviously, a high tax must be paid, but surely there is a way to take advantage of existing tax laws to some degree?

I don't know!

For the company idea; I'm thinking...

If I don't take out too much, it means I won't attract the higher standard rate - at least compared to if I were a sole trader. I'll be honest and admit I haven't done this calculation, nor has the accountant who I have spoken with. It just seems right...

Look, this thread is going off in all kinds of tangents because you seem to have no clear objective. Forgot about creating a company etc and trying to figure it out yourself or jumping to conclusions. You do not have the knowledge or skills necessary.

Any time you set out to avoid taxes, it will not be simple. The Revenue are not stupid, the are fully aware that people will try to dodge their taxes and there are a raft of provisions in place to make it difficult.

A company is very rarely a good structure for a self employed person to solely avoid taxes, there are usually ofter considerations in play. Sure you can reduce your income by paying a lower salary, but the money you leave in the company will have to come out sometime time and there is a good chance it will be double taxed.

My suggestion is to keep it simple, go ask the professionals to make you a proposal as to how to minimize your tax burden and leave it to them to figure out the mechanics and costs.

[Deleted User] · 08-03-2021 9:06am

gudede wrote: »

I viewed the first page and then gave up.

I can see a couple of things;
1) you don’t trust your accountant,
2) the conversation between yourself and accountant wasn’t great,
2) you’re defo the type of client, thats on the phone once a week but don’t want to pay the fees. “C” grade client.

Yes, some fees might seem expensive and others can do the work for cheaper, but remember you get what you pay for.

Incorporating just to save on taxes might not be the best idea. What’s your exit plan? Keep trading till your pension age? Build business and sell in 5-10 years. Are you married, kids etc. All these things + others should be considered.

Ps - you’re also in Dublin. I.e you must pay Dublin tax. You could get an accountant down South.

I think this is overly hostile.

I have already admitted, several times in fact, that I appreciate the cost of professional services but that I'm trying to gauge, as someone new to this arena, what is reasonable. That question has already been answered - as the overwhelming conclusion from posters here is that the costs are more than fair for the services that I require.

Look at what happens if I do not incorporate:

Generate around 10,000 euros per month.

49pc or so must go to Revenue, so that must be set aside.

= 5,100 remaining.

Minus rent @ 2,200 euros = 2,900 euros.

Then, there are other fees / bills / charges that must be accounted for.

This is a very small amount of money, counter to the lifestyle I would wish to live.

[Deleted User] · 08-03-2021 9:33am

Also, can I also ask about preliminary tax.

Let's assume that I'm a sole trader from April 1 onwards - and make approx. 10k a month; what preliminary tax bill can I expect in November?

relevanc · 08-03-2021 11:43am

[Deleted User] wrote: »

Also, can I also ask about preliminary tax.

Let's assume that I'm a sole trader from April 1 onwards - and make approx. 10k a month; what preliminary tax bill can I expect in November?

Again engage an accountant and ask him/her all of these things. Your accountant will go through all of this with you. Only he will know the particulars of your business.

You are expecting some amount of (free) advice on an Internet forum.

mrslancaster · 08-03-2021 2:30pm

Deleted User wrote: »

I think this is overly hostile.

I have already admitted, several times in fact, that I appreciate the cost of professional services but that I'm trying to gauge, as someone new to this arena, what is reasonable. That question has already been answered - as the overwhelming conclusion from posters here is that the costs are more than fair for the services that I require.

Look at what happens if I do not incorporate:

Generate around 10,000 euros per month.

49pc or so must go to Revenue, so that must be set aside.

= 5,100 remaining.

Minus rent @ 2,200 euros = 2,900 euros.

Then, there are other fees / bills / charges that must be accounted for.

This is a very small amount of money, counter to the lifestyle I would wish to live.

Sorry what rent? Are you renting a business premises

[Deleted User] · 08-03-2021 3:39pm

mrslancaster wrote: »

Sorry what rent? Are you renting a business premises

No, apartment / home.

mrslancaster · 08-03-2021 4:44pm

Deleted User wrote: »

No, apartment / home.

Op from reading your posts it seems things are a bit up in the air for you now.
Maybe I'm reading this wrong but if you have been self employed from home and didn't make any returns for vat or tax yet then you need to engage an accountant to get things back on track with Revenue & best to get that done asap imo.
After that you can decide if you want to continue as a sole trader or if you want to incorporate the business. best of luck.

You might get some more information here:
https://www.citizensinformation.ie/en/employment/types_of_employment/self_employment/

How to Choose the Right Accounting Firm?

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