Yesterday, November 14th, was the last day of the Income Tax return season to file your 2023 return. It wasn’t a day of panic in the Comerford Foley office. Firstly, we weren’t in the office, as we were working remotely. Plus, the team had everything under control, although there were a few loose ends to tie up.
I locked myself into my home office and refused to come out until I came up with a number. This was for a long-standing elderly client up the country who’d give out to me for the next year if she got a surcharge. Think of the cardinal picking a new pope. There was white smoke after a few hours, and we had a result. Yesterday not being manic is a credit to our very knowledgeable and committed team. When you get two calls from different team members to see if they could help in any way that speaks for itself.
I wanted to talk about some of the issues and trends we saw over the last few months about Income Tax Return season. These include
- Compliance levels
- Older clients
- Complexity
- Revenue Interaction
- Tax trends
Compliance Levels
Compliance levels are extremely high. What I mean by that is the number of people who submit their returns and payments on time is north of 95%. But it’s not a case of throwing anything on a return and blasting it through the world wide web to Revenue. The return must be right as that protects our clients plus it reduces Revenue interaction. We and our clients don’t want to be wasting time with lots of queries and reviews from Revenue after the fact. That’s why we insist on our clients completing a checklist, so we know if there is other income or costs to claim.
After all, we are dealing with events that happened up to 22 months ago. A client sold shares in January 2023, but we only heard about it in October 2024. The client will have missed the payment deadline of the 15th of December last year. But we can ensure the disposal goes on the Capital Gains Tax section of the return and get it paid too. This avoids surcharges, penalties, and higher interest payments down the line. Although Revenue could charge him interest for the late payment. They don’t tend to do it for smaller amounts but they can if they want.
Payment Dates
An important thing to get right is the payment dates for your taxes. The deadline date of the 14th of November is a two-week extension from the 31st of October. You get that extension if you both pay and file online. So, you must file and have the funds to pay what you owe at the same time. Those clients not in funds to pay needed to file on or before the 31st of October. We had only a couple in this position and the team here ensured those met that deadline.
The payment dates can be tricky. Especially when filing a tax return a few weeks out from the 14th. The important thing to know is if the client met their preliminary tax requirement for 2023. If they did then the payment date is the 14th of November. But, if they didn’t Revenue expect payment at the time of filing the return. When the self-assessment letter issues after filing the return there are one of three messages on the first page.
- This overpayment will be dealt with as soon as possible
- The balance of tax should be paid immediately
- The balance of this tax should be paid on or before the 31/10/2024
If you get the first message, happy days! If you get the second message and haven’t enough preliminary tax paid then Revenue want their money when filing the return. But you could get the second message in early November and have paid enough prelim tax. Then you have until the 14th to pay it. Sometimes as tax agents, we get fixated on the 14th and don’t look at the prelim position.
Wrong payment date
As an example, say we put a payment date through for the 31st of October for John Swan. John didn’t pay any preliminary tax for 2023 but should have paid €5,000. We file his 2023 tax return in May 2024 and the assessment issues showing a liability of €10,000. The “please pay immediately” message is on John’s assessment.
John is on the hols and he has nothing to worry about as he’s sipping sex on the beach by the pool in Albufeira. In the meantime, Revenue start issuing demand letters. We, as tax agents, don’t see these letters as they don’t appear in our ROS inbox. By the time the hols are over Revenue haven’t heard back from him. They pass the case over to the Sheriff to collect the money. So now John owes the tax and sheriff’s fees on top. So, the message is to tread carefully on this one.
Older Clients
Older clients need to be looked after more, so they may need extra attention. Some don’t use e-mail. They want a personal approach where they can call to the office and sit down with someone. Talk to and deal with a familiar face. They want a person who will give them time to explain their accounts and taxes. They are not against technology, but some aren’t comfortable using it and Zoom just doesn’t cut it.
One older lady client was delighted that Ger and Aedin gave her an hour to go through her accounts and taxes. She’s doing a lot of the bookkeeping for her business and doesn’t want to do it. The fact that we can do her bookkeeping on Xero and her payroll is something she’s very interested in. It also helped that she got a nice big tax refund. I had a funny story with an older client two days ago.
Funny Story
Tom Doran is a long-term client, and we usually do his return earlier in the year. We were trying to contact him for a few weeks but no joy. Dee was even looking at RIP.ie to see if he was still with us. I tried his home number and got him on Monday morning. He was eating his breakfast and let me know that my call was badly timed. Tom, I need you to do two things for me. Go over to Dowlings and get a Med 1 report for 2023 and call to the office tomorrow at 10. I sent this to him by text after the call so he wouldn’t forget.
I’m at the desk on Wednesday morning and it 9.55. I open Tom’s letter that goes with his tax return. I’m ready to update this when I have his new tax number. And his tax return is open on ROS so I can input the prescription costs for 2023. It will save him a couple of hundred quid. He’ll be happy. It’s 10 o’clock and no sign of Tom. There’s no sign of him at 10.10, 10.15, or 10.25 either. I call him at 10.28 on his house phone.
“Tom, the fact that you answered this phone leads me to believe you forgot about our meeting at 10″
Reply. “Oh I wasn’t sure if it was at 10 or 11 so I decided to leave at half 10″
Anyway, he wanders in about 11 o’clock with a big folder. The folder has every letter and tax backup since 2006. There was nothing in the folder I needed. I only wanted the Med 1 report.
“Tom did you bring the Med 1 report I asked you for”
Reply “Oh that thing, hold on a minute I left it in the car, I’ll get it”
Meeting
I go back to the desk and laptop and ask Dee to drop the report to me when he gets back. He hands it to Dee and she’s laughing coming down the office and hands it to me. I took one look at it and saw that there was no cost for prescriptions in 2023. A big fat 0 so a complete waste of time! Anyway, I sit down with Tom, and we go through the taxes, and he takes out the cheque book to pay us and asks me.
“Are you still with your partner”?
This has me flummoxed. Does he mean my ex-wife or ex-girlfriend or my business partner, but it would hardly be that! I opt for the first one and say
“Oh no Tom, I’ve been divorced since 2021 so I’m not with her anymore” To which he replies
“No. I meant your business partner, the Foley chap” All I could do was laugh and I’m laughing even writing this. I told him that we were still together, and he replied
“Oh, that’s great, it’s important to be able to work with someone you get on with”
In fairness to Tom, he’s a lovely man and we like working for him. An element of patience is important but there’s great satisfaction knowing that he gets looked after well.
Complexity
The level of complexity and length of the Income Tax return increases every year. New words come into the tax dictionary like “Airdrop” income. Gone are the days when there was a Davy or Goodbody report with dividends from shares and share purchases. Now there are ETFs, other fund investments, currency, and lots more besides. This foreign or ETF income is complex in that there are so many different ways that tax applies. Some of the different ways include
- Income liable at marginal rate and gains liable at CGT rates
- Income and gains are liable at the 41% rate but no USC or PRSI
- Gross roll-up so no tax on the income but the tax on the gain must be calculated in 8 years
A new credit we claimed for some clients for 2023 was the mortgage interest credit. It’s our job to minimise taxes as much as we can for clients. But to do that we need to get the information from clients and answer more questions when doing their tax returns. We must capture that time, so fees go up.
There’s a communication piece too so that the client knows by doing this extra work they saved money. Take that credit and the rent tax credit a client could save up to a thousand euros or more. The job for us and the client is to get the interest certs and rent paid for the child in college. And to populate those sections of the return accurately.
I always recommend that a person gets their return done by a qualified tax professional. The advantage of that is peace of mind. Knowing that you invested some of your time and money to get things done right. Every year we get new clients who did their own returns in the past and they end up costing themselves money. Not claiming everything they can claim and overpaying tax. Often Revenue collect those overpayments over 3 or 4 years by reducing tax credits. You are not handing them a cheque, but you are paying them more than you should be over the 3 to 4 year period.
Revenue Interaction
In the main, Revenue interaction during tax return filing season was very positive. There was no ROS downtime, and we had very few issues uploading returns and processing payments. Plus, interaction through My Enquiries was quite quick when it came to offsets and refunds. There was an issue earlier this year with the Department of Social Protection payments. They didn’t come through on the pre-populated Form 11 which was a pain. In a few cases, amended assessments were issued for small differences after we filed the returns, so a couple of clients ended up paying a bit more.
But there are always areas for improvement. The lack of a general overview of clients on ROS is a pain. It would be great to have a list of clients who owed Revenue money and vice-versa. As I said earlier, we don’t see demand letters for payment, but we should. It annoys me greatly that refunds still don’t get to some clients quickly because Revenue don’t have their bank details on file. They do as the client pays them every year.
And please, will someone in Revenue do a 2024 CG1 form that we can populate like an agent link form. Some older and non-resident clients sold properties during the year and want to pay the tax and do the return immediately. We have to print a 2023 return and use that form. A client sold a property in June this year and I completed the 2023 CG1 and submitted this to Revenue via My Enquiries. I told them it was a 2024 disposal and asked for a CGT assessment to match the return. And I confirmed the client paid the liability.
What did they do? Only issue a 2023 assessment showing a liability of over one hundred thousand. So, we have a 2023 assessment with no payment for 2023 and a payment for 2024 with no assessment. Sorted in the end but all very avoidable if there was a 2024 CG1 form available.
We noted a calming of cancelling tax clearance and no Revenue reviews over the last few weeks. But what appeared in our ROS inbox yesterday was only a Level 2 VAT review for a client. That client has had more VAT reviews at this stage and there has never been an issue.
Tax Trends
I was thinking about the tax trends in the Income Tax returns over the last few months. Some of the obvious ones were
- Salaries increasing all the time. It would be rare to see someone on a lower salary than the year before
- Couple maximising the lower rate bands. It is way more tax efficient for a couple to earn over €80,000 than for one spouse/civil partner to earn €80k plus.
- Rental income increasing all the time, but profits may not be increasing. The main reason for that is the huge increase in interest costs in 2023 compared to 2022. If you are with Pepper or some of the other non-pillar providers, this was very noticeable.
- Farming profits were way lower in 2023 compared to 2022. We don’t have a huge number of farming clients. Profits in 2022 were off the wall but 2023 was very poor with losses and break-even positions in some cases.
- Sole traders that we put into companies saw the benefits of lower tax bills in 2023. If they weren’t in companies, they would experience the usual November pain.
- Last-minute pension contributions are still popular to avoid tax and really only work for those on the top rate.
Revenue knowledge of your income is getting more and more insightful. It’s amazing the amount of information that’s on a prepopulated return now. They could do a lot of tax returns quickly and get them pretty right. The information they have includes
- Subsidy payments
- Social welfare payments to include State pension
- HAP payments
- Forestry premiums
- Employment incomes
- Withholding tax deduction to include non-resident landlord withholding tax
- RCT deductions
I do not doubt that November will be another bonanza month for tax collection. With the 31st of October and 14th of November tax deadlines, there will be a surge in Income Tax payments. Preliminary corporation tax is due on the 23rd of November for those with 31 December 2024 year ends. Plus, November is a VAT collection month for September and October. Added to that is the October PAYE payments. Whoever will be in the next government will have plenty of money to spend. Hopefully, the Monk won’t be anyway near the purse strings!
So, the Income Tax return season for 2023 tax returns comes to an end. We are all a bit older, greyer, and poorer but sure what harm we have Donald Trump for the next 4 years, climate change, and elections to look forward to. Time to start the party!
Do you want help with your taxes to make sure everything is right? If so, start here
