We were chatting in the office yesterday and we all agreed that it’s a “funny” time of year in that people tend to get a bit stressed out and act a bit abnormal around this time compared to other times in the year. I can’t put my finger on it but perhaps Revenue looking for a large amount of cash from our clients so that their taxes are in order is a large contributory factor!
The budget has passed with little in terms of innovation, a small few extra euros for everyone on the one hand and bad news for the hospitality sector and smokers on the other. The presidential campaigning is in full flow with talk of loans, jets to Belfast and expenses all being to the fore. And on the sporting field things are quite enough with County finals finishing and the odd melee, not in Ulster this time, making the sporting headlines. Leinster beaten in Europe and Munster getting over Gloucester and the prior week we had the Freddie Burns [Bath rugby player] incident. The mortification and the slagging for the poor chap must have been unreal! All is not lost in our PC world as we had the return of Podge and Rodge dressed as Donald Trump and Kim Jong-un to add a bit of hilarity to our lives. We won’t say anything about the Saudi Arabians or there could be a hit squad on the way to Tramore!
We are continuing with our series of “you ask we answer” blogs and we thought this would be a timely one given that we are in the thick of tax return season. One thing that resonated with me was our business mentor told us a few years ago that he had a “not to do” list. This was a list of things that he hated doing and vowed that he wouldn’t do any of the things on his list. Top of the list was that he hated cutting the grass in his back garden so he paid for someone to do this. Personally I like doing this as it gets me fresh air and a break from the kids [kids like it too as they get back to their gadgets!] Ok I am getting to the point! The point is that there are certain things like tax returns that you should not do yourself. Don’t do it and don’t even consider doing it. It is a bad idea. Here are my top 3 “don’t dos” from recent experience
Don’t do your own Tax return
We had a call from a client who said he was going to do his own tax return this year as “there was nothing in it” As he is still a client of ours on ROS, about a week later, after he filed his own return, I had a quick look at the assessment. Within the space of 5 seconds I could see that he hadn’t claimed a tax credit worth €1,100. Our fee for doing his return would have been less than half the amount of what he cost himself. The particular individual is an owner director of a company and the surcharge for having a later return or incorrect return is a lot more penal than for a non-owner director. I had another meeting with a prospect around their personal tax issues and the lady, another owner director, confirmed that she did her own tax return. I mentioned to her not to forget to claim the “Earned Income Credit” and she hadn’t heard of this before. This was worth €550 in 2016, €950 in 2017 and €1150 in 2018 so she could be missing out on a combined €2650 over a 3 year period. Over the years we have tidied up the tax affairs of a few, now happy clients, where they did their own returns initially and cost themselves time, money and, in some cases, a Revenue intervention. The key point here is that you don’t pull your own teeth or put in your own filings, you go to the dentist for that. If you are doing something that you have a little bit of knowledge about but are uncertain of various aspects then you need to get your return done by a qualified professional tax adviser or your own accountant. There are many good ones out there that will do it well, ensure you are fully tax compliant and you can sleep easy at night.
Don’t split the company accounts and Corporation Tax return between different advisors
A few years ago we did a few Corporation Tax returns for companies where another accountant had prepared the company accounts. We would have had the full set of company accounts to work off to prepare the adjusted profit computation, the capital allowances computation, the corporation tax computation and the corporation tax return. However we wouldn’t have been involved in the preparation of the accounts so wouldn’t have had either the familiarity with the client or the clients business nor would we have had the breakdown of all the costs in the P&L account. Therefore we were automatically starting the job with one hand tied behind our back. Because of this, we would have had to send numerous queries over and back to the accountant looking for a breakdown of expenses, the make-up of Director’s current accounts, Directors salaries etc so the whole process took quite long and even at that we couldn’t be guaranteed that we got everything right due to not having all information or not asking a question that we should have asked. Thankfully the accountant in question hired a tax advisor and therefore we lost those jobs but that was good for us and also good for the companies in question. There was too much work and uncertainty for us as we were hampered from not having full information from the start whereas the new advisor will have that information and knowledge and can therefore provide a better service to those clients. We had a recent case where we prepared the accounts but another advisor did the Corporation tax work and we took over the corporation tax return filing obligations and this worked out better for us, the client and the prior advisor.
Don’t do your own Capital Gains Tax computations
In the last few weeks a very dear and loyal client of ours sold a rental property and had prepared the Capital Gains Tax computation. Thankfully for him there was a large gain and he calculated his tax liability at about €40k. I have to say this particular guy is very tax compliant and very knowledgeable when it comes to tax and I have told him that he would have had a very good career in tax, but fortunately for him he chose a career in medicine. We had a bit of over and back on the fee for doing the computation and the return which he wasn’t happy with as he had done the work so we agreed to give him a discount on the basis that “there was very little in it”. However, when we asked him the date of purchase of the property and he gave us the answer, we knew he had missed out on indexation relief as, from memory, he purchased it around 1996. Therefore the cost of the property was understated and we were able to increase the base cost by the index factor which reduced his gain and reduced the liability by over €7k! Obviously he was delighted with this, as were we, and he was more than happy not to take the discount in the end.
I know I am harping on about this. When you see the red light coming on on the dashboard you don’t think I must get back home and take out the diagnostic equipment to see what the problem is and then I’ll be able to fix it! You think what time is the mechanic opened at, and I hope he’s not on holidays. Save yourself money, time and worry and sleep easy at night by getting a professional accountant or tax advisor to look after your taxes. It will be worth it.
As always the team at Comerford Foley would be very interested in hearing any tax issues you may have. We are busy due to the season that’s in it but, if you need help with your tax return or Capital Gains tax issues contact us to see if we can help