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Calendar year and tax totals

  • 14-06-2021 2:24pm
    #1
    TP_CM
    Registered Users Posts: 443 ✭✭


    I'm a contractor with a Ltd company (IT stuff). I invoice a single client who pays my Ltd company and from there I draw down a salary as the sole director/employee.

    If I invoice my client on 28th December 2020 for work done in December 2020, and they pay me for that in January 2021, under what tax year would those funds need to be recorded?

    And when it comes to drawing down my personal income - If I withdraw all remaining money earned during '2020' from the business account as a salary payment on January 1st 2021, in which income tax year does that fall under?

    Another way to ask this question is - How do I work out what my total earnings were in a given year, and how do I work out what my total salary payment was in a given year? Is it the physical transfer of cash? Or is it documents like Payslips/Invoices?


Comments

  • #2
    Calahonda52
    Registered Users Posts: 12,192 ✭✭✭✭Calahonda52


    The payroll will be Jan 21: are you on ROS and doing you payroll with a package that updates ROS every time you generate a payslip?

    On what basis are you doing your VAT?
    https://www.revenue.ie/en/vat/accounting-for-vat/index.aspx

    “I can’t pay my staff or mortgage with instagram likes”.



  • #3
    TP_CM
    Registered Users Posts: 443 ✭✭TP_CM


    Thank you Calahonda52 -

    I have a qualified accountant who does all this but I've picked up on a few blunders they've made which left me over-paying by thousands. Had I not questioned this, it would have gone unnoticed. So I just want to do a quick sense check myself, particularly on the income tax front.

    The reason why it's important is because I pay myself a very modest salary throughout the year and then in early January, we look at what's left over in the company account and draw all that down to avoid corp tax. Sometimes the amount could be as large as 50k. For me to do the sense check, I need to know what tax year that 50k bonus would fall under.

    Edit - I hope what I'm saying is making sense.


  • #4
    spoiler
    Registered Users Posts: 38 ✭spoiler


    If I invoice my client on 28th December 2020 for work done in December 2020, and they pay me for that in January 2021, under what tax year would those funds need to be recorded? This would be recorded in 2020 accounts as the work was done in 2020 basically it would be an outstanding debtor at 31.12.2020.

    The payroll would go through 2021 payroll but can be included in 2020 accounts as you can accrue salary up to six months if it goes after the six months you have backdate the previous year.

    This link also explains it:
    https://www.revenue.ie/en/employing-people/becoming-an-employer-and-ongoing-obligations/payments-to-employees/directors.aspx


  • #5
    DmanDmythDledge
    Registered Users Posts: 883 ✭✭✭DmanDmythDledge


    Payroll can be done on the accruals basis for proprietary directors so can go through 2020 payroll if you want.

    Re the company, if you invoice for work in 2020 it goes through 2020.


  • #6
    TP_CM
    Registered Users Posts: 443 ✭✭TP_CM


    Ok thanks very much. So I need to look at invoices to understand my 2020 totals. But for payroll I need to ask my accountant which way he did it.


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