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THE HARD-KNOCK TAX LIFE OF THE SELF-EMPLOYED

With the General Election edging ever closer, taxation has once again come up as quite a hot topic. Everything from the abolishment of the USC to increases in taxation have been discussed ad nauseum in recent weeks. However there is one important taxation issue that is often overlooked, despite being a reality for many workers in this country. The issue at hand here is the many ways in which self-employed individuals find themselves carrying an extra weight of taxation due to their employment status than their PAYE paying counterparts.

Figures from 2014 suggested that the percentage of the Irish workforce who are self-employed makes up nearly a quarter of the overall workforce at over 17%. Thus, the financial burden of harsher taxation here is one which affects a large percentage of our working population and is an issue which demands to be raised. So, if you or your loved one is currently self-employed, just how much of a tax disadvantage does your self-employed status put you at?

One way in which the self-employed are at a disadvantage is through the percentage of tax they must pay. All employees, whether self-employed or otherwise will pay the top tax rate of 52% on all income up to €100,000. However it is when income goes above this figure that self-employed individuals will have to pay an additional amount of USC, which is not applicable to other employees.

The PAYE tax credit is another nail in the coffin for the self-employed as those in the PAYE system gain a €1,650 tax credit each year which can have a lightening effect on your tax bill, this tax credit is not applicable to self-employed workers who will instead now earn a €550 credit on earned income from 2017.

Self-employed workers may also find themselves missing out in terms of paying PRSI. Self-employed individuals must pay PRSI at 4% on any earnings over €5000 whilst PAYE employees do not pay any PRSI if they earn less than €18,304 per year. This difference in PRSI thresholds means that the self-employed person will have paid a significant amount of tax before other employees need to consider it.

If you are self-employed and concerned about perhaps having overpaid tax, we would recommend getting in touch with Revenue for a re-evaluation of your payments from the past four years. If you find yourself in need of assistance with your own or your company’s finances, please don’t hesitate to contact us here at DCA Accountants where we will be happy to help.

TAX BACK: WHAT’S THE CRAIC?

Claiming tax which you have overpaid is a common concern for most workers, yet it is one that is often overlooked. Each of us either know someone or is the person who is most likely to say “I think I have overpaid tax, I will definitely look into it” only to entirely forget and get on with daily life.

Although new tax reductions were introduced in the most recent budget, which may have had a slight effect on our wallets many workers are still feeling the tax pinch. To hopefully alleviate some of this stress, and replace some of the money into your own pocket where it belongs, we have collated some of the most common ways that you may have overpaid tax. Reports suggest that a great many people are unaware of having paid too much tax, and are failing to reclaim it. Many people are also unaware that you can claim for as far back as four years, so whilst you may be on track with tax payments now, it is possible that you can claim for previous years. I’m sure none of us would argue with having a few extra pennies in our wallets for the weekend.

Rental Tax Credit

This credit only applies to those who have been in rental accommodation on December 7th 2010, and is due to be phased out entirely. Before then however, you may be able to claim some tax back for your rental status.

Health Insurance

Those who have private health insurance, you may be entitled to claim some tax back. This will be dependent on the cost of your policy.

Marriage Tax

The common joke about tying the knot for the tax breaks is still doing the rounds, and is based somewhat in truth. If you have been married in the past four years and not notified Revenue, you may have overpaid tax and be eligible for a rebate. This is typically based on what you both earn and your income bands, and your joint assessment situation. Isn’t that what true love is?

DIRT

Whilst first time buying has become a minefield in recent years, the one small saving grace is the ability to claim back DIRT on savings for your deposit. Definitely something for first time buyers to bear in mind during the stresses of purchasing.

Travel Costs

Travelling to and from work every day can be a significant drain on your finances when paying full price for public transport. Employees can purchase a TaxSaver commuter ticket through their employers which allow tax free commuter tickets as part of a salary package.

Home Carer Tax Credit

Many people who have taken time out to care for children or elderly relatives are unaware that a tax credit can be awarded to the working spouse to ease financial worries. In Budget 2016, it was also announced that the cut off rate for the earnings of the non-working spouse would be raised from €5,080 to €7,200, meaning that this can apply to many more people than previously. The credit itself has also been increased this year from €810 to €1,000.

USC

Despite a reduction of the USC in the most recent budget, the USC remains a tax which is an irritation for many workers. There are a couple of ways in which you may have been overpaying this tax and be due a rebate, the most obvious one being in relation to medical cards. If you have a full medical card, you should notify Revenue of your change of circumstances as you may have overpaid USC. Also, if your income fell below the threshold at any point, Revenue should be notified.

Expenses

Many workers remain unaware that they may be entitled to claim tax back on a number of expenses aside from their travel costs. These costs can range from uniforms to tools for trades such as engineers and electricians. For teachers, an annual allowance of €518 is allotted for expenses incurred in terms of teaching supplies, and this applies to many other professions. It is advisable to check the Revenue website to see if you may be entitled to claim back on some of your own working expenses.

These are just a few ways that you may have inadvertently overpaid taxes, and may be able to claim a refund. We would recommend investigating your tax payments in full for the previous four years in order to ascertain if you are due a refund. Should you require any assistance with your own or your businesses finances please don’t hesitate to contact us here at DCA Accountants.

NOT TODAY, MR TAX-MAN!

Tax credits are one of the most easily overlooked aspects of compiling your tax returns. Whilst they vary from person to person there are a number of additional tax credits you may be entitled to as a business owner without realising it. With the October 31st filing deadline rapidly approaching, your tax credits are not something you want to overlook, and knowing what you are entitled to could save you money. We have compiled a list of some of the tax credits you may not have considered but are entitled to.

 

Revenue Approved Permanent Health Benefit Scheme: If an employer deducts contributions from pay, no action is necessary to claim this relief. However, if an employer does not directly deduct contributions, this relief can be applied for in your annual tax return.

 

PAYE – Employee Tax Credit: Available to any employee whose pay is subject to the PAYE tax.

 

Health/Medical Expenses Relief: Available at a rate of 20% for certain medical expenses by completing the MED 1 form. If you have private health insurance, you will be unable to claim relief on any medical expenses which are due to be reimbursed.

 

PRSI: PRSI contributions can be directly queried through your local Department of Social Protection office.

 

Start Your Own Business Scheme: Available until 31st December 2016, this scheme provides tax relief for previously unemployed individuals who start a new business.

 

Start-up Refunds for Entrepreneurs (SURE) Scheme: Those interested in starting up their own company may be entitled to an income tax refund of up to 41% of the capital invested under this scheme. You may also be entitled to a refund of income tax paid over the 6 years prior to investment year.

 

Age Tax Credit: Available to anyone aged 65 or older during the tax year. This credit is doubled for married couples or civil partners if either is aged 65 during the tax year.

 

Single Person Tax Credit: Available to unmarried individuals living alone with the exception of married people who have chosen to be assessed as single people for tax purposed.

 

Married/Civil Partner Tax Credit: Available to an individual who is either married or in a civil partnership. One partner agrees to be the assessable spouse and is entitled to this tax credit as long as they are assessed through joint assessment.

 

Widowed/Surviving Civil Partner Tax Credit: This credit is dependent on when the spouse passed away and whether dependent children as involved. This tax credit will be higher during the bereavement year and is the equivalent of the above two credits.

 

As the deadline of October 31st approaches it would be advisable to submit your information in advance of this date if possible to ensure no unnecessary delays. Should you have any queries about your tax return filing, or if you are concerned that you may be entitled to claim some refunds that you may have overlooked, please don’t hesitate to contact us here at DCA Accountants.