Income Tax Returns – Getting It Right First Time

Last week we looked at Xero from a beginner’s point of view. There are serious benefits. But you must be open to thinking outside the box when looking at your numbers. This week we are going to explore Income Tax returns and how a very super lady in our office gets them right first time. Ludmila is the lady in question. We will look at

• Her Background
• Rental Properties
• Non-residents
• Medical expenses, tuition fees, and
• Gerry Rafferty

Background

Ludmila joined us as a trainee in 2015. She was always interested in numbers and figuring out things. Her interest was in Tax, and she began studying to become a Chartered Tax Advisor. She was born and bred in Moldova so studying Tax in a foreign language is no small undertaking. Plus, she was working at the same time. And raising her family too, so triple jobbing. She qualified in 2019 after 3 years of studying very hard. Now she is the main lady that looks after our Income Tax clients. Those of us who have the privilege to work with her know that she is

• very honest
• always does her best to get things right for the client
• loves saving our clients’ money
• very friendly and easy to deal with
• Quiet but a determined lady behind the angelic features

From our point of view, it is super to see how much her confidence is growing and her tax knowledge increasing. Below is a flavour of the value she brings to our clients.

Rental Properties

John Ronan bought a house in Dublin in 2020 that divides into six apartments. He planned to carry out a large refurbishment on the property and let out each apartment at a higher rent. Ludmila checked out the pre-letting expenditure rule. This meant John could get a tax write-off for repair type costs incurred before letting. This cost was close to €30,000 and will save the client over €10,000 in tax. Not only that but John now has a schedule of the €115,000 spend. She divided the total spend into what qualifies for

1. Repairs
2. Capital allowances
3. Enhancement expenditure

Repair costs qualify for a write-off in year one, in most cases. The tax relief on Capital allowances is over 8 years. And enhancement costs will reduce the Capital Gains Tax on a future sale.

Protecting the client is vital when it comes to rental properties. At times you get very round numbers for expenses with no backup. In the majority of cases, she will not deduct those costs. While the client will end up paying a bit more, they have no worries if Revenue come calling to look for backup. This works well for us too as it cuts out the messing and we stand over the numbers that go to Revenue.

Non-Residents

Mick Cave lives in Brunei and emigrated there from Ireland four years ago. He and his wife Meabh rent their Irish property. Meabh isn’t working. By splitting the income into two and filing separate tax returns the Caves save over €1000 each tax year. This is the correct way to return the rental income of non-residents. But knowing this and recommending it to the client both ensures they save money and do things right.

We have many non-resident clients and each client’s circumstances are different. To know about

• Splitting Incomes
• Claiming a personal tax credit based on Irish v worldwide income
• USC cut off points
• No PRSI
• Sorting out tax payments when the client has no Irish account

are all important for the client and she ensures they get the best service possible.

Medical, Tuition fees and

Mary Jones, by her own admission, is a bit disorganised. No wonder she’s a busy lady juggling 5 kids and work. They have a lot of medical expenses they didn’t claim. Her husband Joe is studying and working too. She knows that she has plenty to claim and has a few years to tidy up. Ludmila meets her and they go through all her circumstances to find out exactly what’s going on. Mary gets a detailed list of what she must get. And good advice that if she doesn’t her documents into us before the end of 2021, she won’t get a tax refund for 2017.

Ludmila goes through all the information that Mary gave to her. She confirms what she can claim and tells Mary that she will be in a tax refund position because of

• Medical expenses
• Medical Insurance paid by employers
• Tuition Fees

After a couple of meetings Ludmila gets to know Mary a bit better and learns that Mary has a child with a difficulty. She mentions the incapacitated child tax credit to Mary, and they explore this further.

Mary got tax refunds for 4 years and was able to claim the incapacitated child credit for those years too. Ludmila had agreed a fee with Mary at the outset so Mary knew what she would get from Revenue and what she would pay us. No surprises and all sorted in a friendly helpful way.

Gerry Rafferty

Anyone under 50 will be scratching their head and saying who the heck is Gerry Rafferty? He was a singer in the 1970s and I remember a song that he had called ‘Get it right next time’. One of the lines in it goes

“No use complainin’, don’t you worry, don’t you whine

Cause if you get it wrong, you’ll get it right next time”

Ludmila will get an awful shock when she opens and sees her pic and reads that we are talking about her. From all the gang in CF, we love working with you. We have only talked about half your talents. She also weaves her magic with payroll, but it isn’t her favourite.

So, if you are getting your tax return wrong give it to Ludmila and you will get it right next time. Need help Start Here