INCOME TAX PAY & FILE DEADLINE

No more excuses. No more procrastination. Come in Mr Taxpayer your time is up.

That’s the key message from both The Sunday Business Post and The Sunday Times, both of which devote copious space to the upcoming October 31 and November 15 tax deadlines.

This year, taxpayers must file their return for 2010, pay the balance (if any) of last year’s tax bill and pay preliminary tax for this year. The calculation of 2011 preliminary tax and the 2010 full-year payments are particularly problematic this year because of the introduction of the universal social charge (USC) and the further restriction on certain tax reliefs.

“Taxpayers have three payment options when it comes to paying preliminary tax liability,” The Sunday Business Post notes. “Pay 90% of your total tax liability for 2011; pay 100% of your total tax liability for 2010; or pay 105% of your total tax liability for 2009.”

Bernard Doherty, president of the Irish Taxation Institute, told the newspaper:

“Option 1 will probably result in a lower preliminary tax liability if your taxable income has fallen significantly since 2010.

“Many taxpayers choose to base their payment on Option 2, as this provides certainty that an underpayment of tax will not arise. Importantly, you must still factor in the USC if you choose the 2010 option. You must calculate what your final liability for 2010 would have been if the USC had been in place in 2010.”

Even in the teeth of the ongoing recession, where cash-flow has never been tighter for many small businesses and sole traders, there is no ignoring the tax deadline.

That doesn’t mean people in difficulties cannot try to negotiate with Revenue to pay in instalments but simply burying your head in the sand and hoping the Angel of Death will pass over is not an option for those who want to avoid potentially draconian penalties for a failure to file on time.

Anyone who cannot pay both their 2010 bill and their 2011 preliminary bills is advised to concentrate on clearing 2010 first. Around 170,000 2010 returns have already been filed, according to Revenue, who said around 430,000 forms were returned for 2009. It expects a similar number this year.

In a separate article in The Sunday Business Post Brian Keegan, a director of taxation with Chartered Accountants Ireland, points out the “self-employed will share the same restrictions on tax credits and tax bands as their fellow citizens in employment and pay PRSI but have fewer social welfare entitlements (one example is no unemployment benefit).

“Against that, where their income is over €100,000, the self employed have a higher burden of USC … any criticisms that the self-employed get away more lightly than employed persons are wide of the mark.”

He also notes the difficulties of a system based on notional earnings, particularly in the current economic climate.

“Self-employed people must pay tax on income they have yet to earn. That’s not such a big deal where incomes are increasing every year and credit is readily available, but it’s been a significant problem since the credit crunch.

“There will undoubtedly be cases this year where returns can be made but the funds will simply not be available to make the tax payments along with the returns.”

Keegan recommends making the return anyway and contacting the Revenue immediately. That way interest charges will still apply but at least late filing charges won’t.

If you are among the majority who have not yet filed, the advice is not to panic but to put your house in order quickly – the alternative is to risk hefty penalties, interest and a possible audit.

The paper filing deadline is October 31 but 77% of all returns filed last year used ROS, the Revenue’s online service, which has a November 15 deadline.

Also, remember you could be liable to file even if you happen to be a PAYE employee who derives income from sources yet untaxed, such as rental income, profit from share options or income from abroad. Ignorance is no excuse: the onus is on the individual when it comes to tax liability.

Contact Anthony Casey in Noone Casey for proactive tax advice if you have yet to file your tax return.