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.