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Self-assessment tax return: A guide on how to complete it

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The deadline for filing your self-assessment tax return is looming. Yes, it’s that time of year again if you’re self-employed. And lest you forget it, Revenue currently has an ad on national radio stations reminding you of your obligation.

The official deadline is 31 October – but it can be extended, if you both pay and file through ROS (Revenue Online Service). The extended deadline for 2019 is 12 November, two days earlier than in 2018.

The deadline for postal returns is also 31 October. But Revenue has now made online filing mandatory for most categories of taxpayers, with very few exceptions. So that’s really a moot point.

About 14% of taxpayers in Ireland are self-employed and in 2018, Revenue received approximately 700,000 self-assessed income tax returns.

However, more than half of those returns were from PAYE workers, who were also obliged to file a tax return. For instance, if you’re a PAYE worker but earn other income from rent or investments, then you need to file a return.

Also, what many people don’t realise is that if you receive overseas income, you also need to file a return.

“Taxpayers who have rental or other income overseas and have paid taxes in that country think that they do not have to file in Ireland,” says Rory Coll, who runs a long-established accountancy practice, Coll & Co, in Galway.

“This is incorrect, as once you are in receipt of income outside of your PAYE income [regardless if you are making a profit or loss], you must file a tax return and you can normally claim a credit for any foreign tax paid against any Irish tax liability.”

There are two potential forms to fill out.

For PAYE workers, you can submit a Form 12, if your non-PAYE income does not exceed €5,000.

If it exceeds €5,000, then you must register for the self-assessment income tax system and when registered, submit a Form 11 to the Revenue Online Service (ROS).

How to register for self-assessment

But first things first. How do you register?

Firstly, you have to apply online on for your ROS Access Number (RAN), which will be sent out to your postal address.

Once you have received your RAN, then you have to apply for your digital certificate. You do this by entering your RAN number on Revenue.ie and answering all relevant sections.

A ROS system password will then be sent to your postal address. Using this password, you can retrieve and download your digital certificate, which you should name and allocate a password to.

Once you have retrieved your ROS digital certificate, you can access ROS to file your return, pay your tax and view your account.

The registration process can take up to 10 business days, so you need to get moving if you’re not registered yet.

How to complete a self-assessment tax return

As the name implies, you are responsible for assessing what tax you must pay, though ROS does the calculations for you, based on what information you input.

You can claim certain business expenses against tax, such as rent, lighting and heating, accountancy fees, and interest paid on business loans.

Once you’re registered, you fill out a Form 11 online. Your tax liability will comprise two elements: the balance of income tax payable from 2018 and a preliminary tax liability for 2019.

The preliminary tax should usually be 90% of the current year liability. Once you know your total liability, you make your payment via ROS.

Though you don’t have to submit any supporting documents such as invoices, bank statement and receipts, you need to keep them. Because if Revenue ever audits you, you’ll be expected to provide those documents.

Tax rates

Tax rates are the same as for PAYE workers.

If you’re a single person, the first €34,550 is taxed at 20% and the balance is taxed at 40%. If you’re married with one income, the first €43,550 is taxed at 20% and the balance at 40%.

If you’re married with two incomes and doing a joint assessment, it’s a little more complicated but in principle, a married couple pays less tax than two single people, but not significantly less.

You also have to pay USC (Universal Social Charge) and PRSI (Pay Related Social Insurance) on top of your tax liability and these are both charged on your gross income.

Some good news for the self-employed is that since 2016, self-employed workers are entitled to an earned income tax credit. This was introduced to in some way level the playing field with PAYE workers, who receive a PAYE tax credit of €1,650.

The earned income tax credit has been increasing gradually in the last few budgets and it has gone up by €200 to €1,350 for this year’s tax returns.

Once your tax has been calculated, ROS subtracts your tax credit to reduce the amount you actually have to pay.

Common mistakes

Rory Coll outlines a couple of the common pitfalls self-assessed taxpayers make when completing their returns. One is in relation to the Local Property Tax (LPT).

He says: “One particular trap to watch out for is that although you may file your income tax return on time, your LPT may not be up to date.

“If that is the case, Revenue may apply up to a 10% surcharge to your income tax return which may be quite penal, as it then considers all your filings are late.”

Another potential banana skin is around mileage and travel expenses. Coll adds: “Self-employed business owners may think that they can claim mileage and overnight allowances at civil service rates, but this is only available to employees. The self-employed can claim for only receipted expenses.”

Penalty for late filing

A late-filing financial penalty is added to the tax due. If the 2018 return is submitted before the end of December 2019, the surcharge will be 5%.

If the return is filed in 2020, the surcharge will be 10% and, in addition, interest will be charged on the tax due at a rate of approximately 10% per annum.

But perhaps even more worrying than a financial penalty is that if you’re late filing your tax return, it could potentially trigger Revenue to carry out a tax audit on your financial affairs – and that is not something you’d like to invite upon yourself.

Don’t leave it to the last minute

One final word of advice – don’t leave filing to the very last minute. On deadline day, ROS can slow down because many of the other 700,000 self-assessed taxpayers are trying to log in.

That said, Revenue has improved its website and this is less of an issue than previous years. But it’s wiser not to test it.

And if you need to read up more on the process, a good reference website is Citizensinformation.ie, which lays out several examples of how self-assessment income tax is calculated.

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