What is a Form 12?

The Form 12 is an annual Income Tax return for people whose primary sources of income are their PAYE income. If you are in receipt of any other income apart from your income earned as an employee you may have an obligation to declare this on a Form 12.

Why would I have been sent a Form 12?

• You could have been chosen at random to complete a Form 12.
• The Revenue may have obtained third party information regarding additional non- paye income such as payments from the Department of Agriculture.
• You have had a gain subject to Capital Gains Tax during the year, an example would be property or shares sold.

What income types are assessable under a Form 12?

• Income from a Trade or Profession – e.g. Farming Income.
• Rental Income.
• Dividend Income.
• Foreign incomes – Foreign Pensions, Foreign Rental Income.

When should I complete and return my Form 12?

Typically, you will need to complete your Form 12 by October 31st in the year following the tax year of assessment. i.e. For 2012 taxes, the Form 12 must be submitted by 31st October 2013.

What Should I do now?

If you have received a Form 12 do not ignore it. You must complete the form honestly ensuring that you declare your income from all sources. In some circumstances it may be beneficial to seek professional advice.

WWW.THETAXCLINIC.IE was founded in February 2010 by Michael Coll & Mabel McHugh. Since then Michael & Mabel have secured vast Tax Refunds for many satisfied customers and are looking forward to many more years of sustained growth.

The Tax Clinic is the only business in the Northwest that specialises in offering services to P.A.Y.E workers. Mabel says that “while working for over 20 years in the financial services sector she noted that there was no professional representation for P.A.Y.E workers”.  With this in mind Mabel together with Michael, who are both members of The Irish Taxation Institute set up www.thetaxclinic.ie and have gained a huge reputation in this complex area of taxation.

Mabel works in The Tax Clinic in Main Street Killybegs, while Michael now works in their new premises on the High Road Letterkenny along with The Tax Clinics third partner Noel O’ Donnell who has also located Noel O’ Donnell & Co Chartered Accountants in the same building.

Other Services:

We also offer a cost effective payroll outsourcing service. We can also look after your P.A.Y.E and V.A.T compliance and obligations.

To find out more log onto www.thetaxclinic.ie or call into either the High Road Letterkenny or Main Street Killybegs”

It is a fundamental principle of self assessment tax systems that Returns filed by compliant taxpayers are accepted as the basis for computing tax liabilities. However, Revenue promotes compliance with the Tax System by vigorous pursuit of those who do not file Returns, by auditing selected Returns.

Revenue Audits can be a burden to people and may cause disruption to their business, but they are a necessary and fundamental part of the Tax System.

What Taxes are covered:

The main taxes covered are:-

Income Tax

Corporation Tax

Capital Gains Tax

Vat

Capital Acquisitions Tax

Stamp Duty

PAYE/PRSI

Types of Revenue Audit:

• Desk Audit : The Inspector will request that certain books and records be left at the Tax Office for inspection.
• Visit to Business : The Inspector will call to your place of business and after an initial interview will examine the books and records.  This Audit may be confined to one Tax Head eg. Vat or may extend to cover all relevant taxes.

Notification of a Revenue Audit:

21 Days Notice of a Revenue Audit is generally given to both the Taxpayer and his/her Agent.

The scope of the audit will be set out.

Taxpayer Disclosure:

The Taxpayer can make a “prompted Qualifying Disclosure” before the examination of the books and records begins.  This disclosure must be made in writing and is accompanied by a Declaration that all matters contained in the disclosure are correct and complete.

A payment of the tax due, together with interest on late payment of that tax, must also be included.

The advantage of a Qualifying Disclosure that the Taxpayer avoids Publication of the Tax Settlement and also the amount of penalties due will be reduced.

How is the case selected:

There are several reasons why a Tax Return may be selected for a Revenue Audit:

• Informed selection from the risk profiling of cases using Computer assisted profiling as well as local knowledge.
• Emphasis of a particular Sector or Scheme where the margins etc may not conform to Industry norms.
• Random Audit programme.

REAP:

This is the Revenue evaluation and analysis programme and it analyses information entered on your Income Tax Return.

• It compares same with comparable businesses for margins etc.
• It compares your Return with information already in the system concerning you.

Location of Audit:

Unless otherwise justified, the audit is carried out at the taxpayers place of business.

An Audit may only be conducted at the Residence of a taxpayer (where he has no trading Premises) with the consent of the taxpayer.  Otherwise the books and records are collected and the Audit is carried out at the Revenue Office.

Audits are not normally carried out at an Agent’s Office.

What happens:

On arrival at the place of Audit the Inspector will show his/her identification and authorisation and explain the purpose of the Audit.

The Taxpayer is offered the opportunity to make a prompted Qualifying Disclosure.

After the initial Interview examination of the books and records will begin.

Initially the Audit will concentrate on the years etc indicated in the Audit Notice.  However, issues may arise that may require the Auditor to consider opening earlier or later years.

In the event of an underpayment the Auditor will calculate interest on late payment and the appropriate penalty.  The Taxpayer will be required to forward a written Settlement Offer to the Inspector.

Summary:

Revenue Audits are an important part of the Tax System.

To receive notice of an Audit can be a stressful time for the Taxpayer.  However, if you maintain proper books and records and file your various Returns on time and make payment when due then the Audit should be completed quickly.

Legal structures: You can set up a business as a sole trader, as a partnership or as a limited company. The type of structure you choose depends on the kind of business you are running, with whom you will be doing business and your attitude to risk.

Sole trader: It is relatively simple to set up as a sole trader but if your business fails, your personal assets could be used to pay your creditors. Your main legal obligation is that you must register as a self-employed person with the Revenue Commissioners.

Partnership: This is where 2 or more people agree to run a business in partnership with each other. The partnership agreement should be drawn up by a solicitor. The partners are jointly responsible for running the business and if it fails all partners are jointly severally responsible for the debt.

Limited company: If you set up your business as a limited company, the business is a separate legal entity. If the company gets into debt, the creditors generally only have a claim on the assets of the company. The company must be registered with The Companies Registration Office (CRO) and the company reports and accounts must be returned to the CRO each year. Bank Borrowings will more than likely be secured by a personal guartantee.

Business name: Many businesses operate under the names of their owners, others adopt a business name. However, if you adopt a business name other than your true surname (and christian names) or registered corporate name (in the case of a company) you must register the name under the Registration of Business Names Act 1963 with The Companies Registration Office (CRO).

If a business name is used, the Certificate of Registration must be displayed in a prominent position at all locations to which customers or suppliers have access.

Keeping Records: Full and accurate records of your business transactions should be kept in full from the very start. Keeping accurate records helps you to evaluate the performance of your business, it is a legal obligation, accurate records are required to prepare and submit your tax return and your bank may require a copy of your accounts data.

A Vat registered person must keep full and true records of all business transactions which affect his or her liability to Vat and entitlement to deductibility. If you employ staff you are required to register as an employer and register for P.A.Y.E and P.R.S.I. As an employer you must maintain certain records such as hours worked, rate of pay, holiday and bank holiday entitlements and these can be inspected by the National Employment Rights Authority or the Revenue when requested.

Free No Obligation Consultation: If you have recently started a new business or are thinking about becoming self-employed please contact us today for a free no obligation consultation to discuss your requirements.

We can guide you through every step of the way from the Initial set up, Tax Registration, Book – Keeping Advice and Staff Recruitment.

To find out more call into either of our offices on the High Road Letterkenny or Main Street Killybegs or contact us by phone or email.

You do not have to register with the Private Residential Tenancies Board (PRTB) as a landlord, provide a rent book to the tenant or ensure that the accommodation provided meets any minimum standards.

Rent Relief:
In order to claim rent relief, you must be paying rent for private accommodation in your main residence and paying income tax in Ireland.  The maximum annual amount that a single person under 55 can get is €240 in tax relief, €480 for a married couple under 55. Rent relief is currently being phased out, and 2017 will be its last year.

Medical Expenses:
Tax relief at the 20 per cent standard rate is available on a wide range of medical expenses for up to four years after you incur them. This means that, when you spend money on medical care that otherwise is not covered by the state or your private health insurance, you can claim some of the money back as a rebate on tax you’ve paid.

The most common expenses covered by the relief are doctors’ fees, consultants’ fees and prescriptions, but hospital treatments and routine maternity care – among other expenses – are also covered. Routine dental and optical treatments are excluded, but procedures such as orthodontic and root canal treatments are covered.

For children with cancer or permanent disabilities, relief is also available for certain expenditures beyond the medical treatment. Receipts must be kept for six years, and given to the Revenue in the case of an inspection.

Work Expenses:
Flat-rate expenses are incurred while carrying out your duties in employment, and can be deducted from your income before it is taxed. They are directly related to the nature of the employee’s employment.

A standard flat rate for expenses is agreed between the Revenue and representatives of groups or classes of employees (usually represented by trade union officials). The agreed deduction is then applied to all employees of the class or group in question.

For example, nurses who are required to provide and launder their own uniforms are granted a deduction of €733. Teachers are granted a deduction of €518, while the deduction for a Journalist  is €381. There are a surprising number of areas and professions that can avail of this tax relief.

Mind a child, claim a tax break:
With Ireland officially boarding the highest birth rate in the EU’s 27 member states, this could be your opportunity to turn the state’s record fertility rate into a cash-cow of your own.

A person who works as a child-minder, taking care of up to three children all of whom are under the age of 18 may be entitled to avail of a special tax exemption which will permit them to earn €15,000 tax-free.

The child-minder must be registered with the tax office and the work must be carried out in the child-minder’s own home and no more than 3 children may be cared for at any time.. However, if the child-minder’s income goes over the tax exemption limit of €15,000, the entire income is liable for tax on the same basis as a normal self-employed person.

The tax exemption is called childcare services relief. Once child-minders have been deemed to qualify for this tax exemption, they will be asked to pay an annual PRSI contribution of 4 per cent on all their child-minding income, or €253.00, whichever is the greater.

The purpose of this PRSI contribution is to go towards the child-minder’s social insurance record and the build-up of pension and other entitlements, such as maternity benefit. Child-minders wishing to avail of the tax exemption should also notify the local county childcare committee that they are providing the service.

Cycle to work, catch a tax break:
If public transport does not appeal to you, there is also an old fashioned bike. In addition to the exercise, there is also a tax incentive – the government introduced a tax-free bike scheme for employees cycling to work.

Using the Cycle to Work scheme, employers can buy a new bike and safety equipment for up to €1,000. Employers deduct the cost of the bike and equipment from the employee’s salary each month. This can lead to savings of up to 52 per cent off the retail price of the bike and equipment.  All kinds of bikes, from mountain bikes to hybrids to road bikes, are included in the scheme. It is open to all Irish tax paying employees, both part and full time. The scheme must be operated by the employer.

The scheme has benefits for the employer also in terms of PRSI savings, reduced parking problems, savings in parking tax and healthier, fitter work force.

Get married, get the benefit:
Tax might not be the main reason for a couple to tie the knot, but there are numerous tax advantages for getting married – shared tax credits, CGT benefits on asset transfers, and various other spousal exemptions.

Married and civil partner couples can choose to be taxed in any of three ways – single assessment, separate assessment or joint assessment. Joint assessment option usually works out best. The option is automatically given by the tax office when you advise them of your marriage (or civil partnership), and allows couples to share and allocate their tax credits and standard rate cut-off point to suit their own circumstances.

If only one spouse has taxable income, all tax credits will be allocated to the spouse with the income.

If both have taxable income, they can decide which spouse is to be the assessable spouse.

Couples can choose to use their tax credits in whatever way suits them best. Some prefer to allocate their credits against a spouse’s PAYE income, meaning that their take-home pay is boosted on a regular basis.

In the current climate, it is also worth remembering that, if one of the couple loses their job, the working partner can claim the tax credits for the non-working spouse.

In the year you get married, both you and your partner continue to be treated as single people for tax purposes. However, if the tax you pay as two single people is greater than the tax that would be payable if you were taxed as a married couple, you can claim back the difference.

Tax relief on college education:
If you have one or more children attending college, then the chances are you know all about the value – and cost – of a good education. But there is, literally, some relief from the rising fees and other costs of going to college. Students or their parents can claim tax relief on tuition fees paid for approved undergraduate and postgraduate courses, as well as certain information technology and foreign language courses.

You can claim tax relief as long as you have actually paid the fees, either on your own behalf or on behalf of another person. The tax relief does not cover examination or administration fees, nor indeed any part of the tuition fees which have been covered directly or indirectly by a grant, by an employer or via a scholarship.

Tax relief is given at the standard rate. There is no limit on the number of individuals for whom you can claim.

One Parent Family Tax Credit:
The one parent family tax credit is granted to a single parent who has a qualifying child residing with them for the whole, or part of the tax year. In practice, if a single parent has a child residing with them for even a short period during the income tax year, they will qualify for the one parent family tax credit. This tax credit is not available to a single parent who is living with another person as husband and wife.

Mortgage interest relief:
Mortgage interest relief is based on the amount of mortgage interest you pay in a year. Your mortgage lender gives you the benefit of tax relief at source (TRS) so the lender automatically reduces your mortgage payment by the amount of tax relief you are entitled to each tax year. Mortgage interest relief for first-time buyers in 2012 is 25 per cent for the first and second tax year in which you pay mortgage interest. The rate for tax years three, four and five is 22.5 per cent. After that you will get relief of 20 per cent but 2017 is the last year in which mortgage interest relief will be available.

www.thetaxclinic.ie was founded in February 2010 by Michael Coll & Mabel McHugh. Since then Michael & Mabel have secured vast Tax Refunds for many satisfied customers and are looking forward to many more years of sustained growth.

The Tax Clinic is the only business in the Northwest that specialises in offering services to P.A.Y.E workers. Mabel says that “while working for over 20 years in the financial services sector she noted that there was no professional representation for P.A.Y.E workers”.  With this in mind Mabel together with Michael, who are both members of The Irish Taxation Institute set up www.thetaxclinic.ie and have gained a huge reputation in this complex area of taxation.

Mabel works in The Tax Clinic in Main Street Killybegs, while Michael now works in their new premises on the High Road Letterkenny along with The Tax Clinics third partner Noel O’ Donnell who has also located Noel O’ Donnell & Co Chartered Accountants in the same building.

Other Services:
We also offer a cost effective payroll outsourcing service. We can also look after your P.A.Y.E and V.A.T compliance and obligations.

To find out more log onto www.thetaxclinic.ie or call into either the High Road Letterkenny or Main Street Killybegs”

Health Insurance Premiums
Tax relief is granted on health insurance premiums at source. Therefore, any payments made to VHI, Laya Healthcare, Aviva Health or other such health insurance bodies, are made at a reduced premium equal to 80% of the gross amount to your health insurance provider. This is the same as getting tax relief of 20%, but the tax credit is granted directly by the health insurance provider. For those whose employer pays their medical insurance, tax relief at source is not available. Instead, an employee can claim the relief due by having the credit coded onto their certificate of tax credits. In addition, where an employer pays your medical insurance premium, a benefit in kind charge arises and PAYE/PRSI and the USC must be deducted by your employer on the value of the benefit provided.

Qualifying Medical Expenses
For those who do not have any health insurance, a claim for tax relief at a rate of 20% can be made on any qualifying medical expenses that have been incurred. It is important to note that you must have actually incurred the cost of the medical expenses and, therefore, tax relief cannot be claimed on any expenditure that:

• Has been, or will be, reimburses by another body such as the VHI, Laya Healthcare, Hibernian Aviva Health, the Health Service Executive or other body or person;
• Has been, or will be, the subject of a compensation payment; and,
• Relates to routine dental and ophthalmic care.

Thereafter, it must be a qualifying medical expense which is outlined in Revenue’s Information Leaflet IT6. Some of these expenses are as follows:

• Doctors and consultants fees;
• Treatments prescribed by a doctor or consultant, e.g. physiotherapy;
• Drugs or medicines prescribed by a doctor, dentist or consultant;
• Treatment in a hospital or approved nursing home;
• Transport by ambulance;
• Routine maternity care;
• Kidney patients’ expenses (up to a maximum amount depending on whether the patient uses hospital dialysis, home dialysis or CAPD);
• Cost of educational psychological assessments for your child;
• Certain items of expenditure in respect of a child suffering from a serious life threatening illness;
• Laser vision correction surgery;  and,
• Trained guide dog supplied by the Irish Guide Dogs for the Blind.

If any of these treatments are carried out abroad, these will also qualify for tax relief provided that the practitioner carrying out the treatments is entitled under the laws of the country in which the care is provided to practice medicine there.

The cost of travelling abroad is not an allowable expense. However, there are limited exceptions (e.g. where the healthcare is only available outside of the state). In this case, the cost of reasonable travelling and accommodation expenses are allowable. Relief is not available in respect of cosmetic surgeries such as Botox injections.

Dental Expenses
Tax relief is available only in respect of non-routine dental treatment. Therefore, routine dental treatment such as extraction, scaling and filling of teeth and the provision and repairing of artificial teeth or dentures is not allowable.

You must claim non-routine dental expenses on Form Med 2 which is signed and certified by a dental practitioner. The below list outlines the type of dental treatments for which tax relief is allowable:

• Crowns;
• Veneers/Rembrandt-type etched fillings;
• Tip replacing;
• Endotonitics – root canal treatment;
• Periodontal treatment;
• Orthodontic treatment;
• Surgical extraction of impacted wisdom teeth; and,
• Bridgework.

Tax relief on non – routine dental treatments obtained outside the state may also be available provided the dentist is a qualified practitioner.

Michael Coll is a partner and founding member of www.thetaxclinic.ie. His office is located on the High Road Letterkenny.