By Damian Wilson

Every day of the week we strive to make our money go further. Whether it is comparing our electricity providers, shopping around for an insurance quote or simply choosing Aldi over Tesco.

So why is it, a lot of individuals are not reviewing what is most likely their largest outgoing in their house, their TAX BILL?

Remember, every single one of us has an obligation to pay tax, but nobody has an obligation to overpay, yet statistics will show you that over 80% of tax payers overpay their taxes.

Only those who file an annual Tax Return and claim their entitlements with Revenue Commissioners will receive their portion of the overpaid taxes sitting on Revenue’s balance sheet. Once 4 years has passed this refund is no longer available and Revenue can use these funds as they wish.

There is still a “fear factor” with Revenue where a lot of individuals are afraid to file a tax return in case they end up with a liability. This is very rarely the case, however if it does happen it is important that such an issue is addressed ASAP, as it could continue to occur going forward, and let me tell you the 4 year time limit mentioned above, does not apply to Revenue.

There are 2 types of individuals who should be filing tax returns annually.

PAYE Taxpayers and Self-AssessedIndividuals.     

PAYE Employees

“Sure I’m a PAYE worker, my tax is deducted at source”

This is a common response when we advise tax payers on pension of the importance in filing an annual tax return with Revenue. This is true, however over 80% of PAYE tax payers over pay their taxes by on average €880 every year, and this is only of the people who actually do file returns.

There are usually 3 reasons why individuals overpay their taxes.

  1. Payroll Errors – yes, on the most part your pension is calculated correctly on payroll software. However that software relies entirely on the information inputted by the payroll officer, who in turn relies on information from you, the Revenue Commissioners and the pension provider.

With that much human input involved, you can see how human error could result in an over (or under) payment of Tax, USC or PRSI . It happens!

  1. Incorrect Allocation of Allowances – whether you are a married couple or a single person with more than one source of income, you have certain rate bands and credits available to you with regards to Tax and USC.

In order to ensure you do not overpay tax these allowances should be allocated according to the level of income between spouses and/or different sources of income, subject to Revenue limits. Where these allowances have not been reviewed regularly, more often than not they are allocated incorrectly, which is resulting in overpaid taxes.

  1. Claiming your Allowances, Reliefs & Credits – I think I am safe to assume, Revenue Commissioners are not calling you, asking you all the relevant questions, and advising you of your entitlements. Revenue put the onus on the individual tax payer to research, understand and ensure that they are claiming all their entitlements……. How many of you studied taxation on the side?

Below are just some of the reasons why you might be missing out on tax refunds if you are not filing returns, there are many more:

  • Marital Status
  • Medical Expenses
  • Dependant Relatives
  • Renting
  • Tuition Fees
  • DIRT refunds
  • Age Credit
  • Home Renovation Incentive
  • PRSI refunds once over 66
  • USC refunds for over 70’s

Self-Assessed Individuals

“Sure I can’t file my Tax Return until the 31st October”

This is a common response when we advise Self-Assessed clients to prepare their annual Tax Returns early in the year. Maybe it is just an Irish thing, but people tend to see the 31st October as a “target”, rather than a “deadline”. You can prepare your prior year Tax Return any date from the 1st January the following year.

Examples of Self-Assessed individuals are:

  • Individuals with self-employment income
  • Landlords
  • Individuals with Investment Income
  • Individuals in receipt of foreign pensions
  • Individuals with annual income greater than €3,174, outside of PAYE   

There are many advantages to preparing early:

  • Your liability does not have to be paid until the 31st October.
  • Allows you to budget and plan for your upcoming bill
  • Avoids any last minute financial panic or stress
  • Your accountants invoice will not arrive at the same time as your tax bill
  • Avoids the possibility of missing the deadline and incurring unnecessary charges of up to 10% of your liability and daily interest 
  • Should you be in a refund situation, you can secure this earlier

Remember, self-assessed individuals are legally obliged to file an annual tax      return. They are required to calculate their own taxable profits, calculate their Tax, USC and PRSI liabilities and pay these amounts to Revenue Commissioners on time and in a format acceptable by Revenue……… Again, how many of you studied taxation on the side?