Top three tips to avoid penalties on your tax return
It’s tax return time again and there is a lot of talk in the media about budgets, filing deadlines, penalties, interest, Revenue Audits, etc, etc. There are a few misconceptions out there about filing deadlines and penalties, so based on our experience here are three key tips:
1. Extended tax filing deadline:
If you are a self-assessed taxpayer the income tax filing deadline is 31st October. If you miss it Revenue will impose an automatic penalty of 5% (rising to 10%). There is an extended filing deadline of 14th November; however this only applies if you can PAY and file through ROS. If you cannot pay your FULL liability then you will not qualify for the extended deadline and you will incur a penalty. A lot of people fall into this trap every year so to avoid a penalty file your tax return before 31st October regardless of whether or not you can pay the tax.
2. Local Property Tax (LPT):
This is a new one and it’s a tough one. If you have failed to submit your LPT return, or have failed to either pay the LPT due or to enter into an agreed payment arrangement, a surcharge of 10% will be applied to your income tax liability. It doesn’t matter what your LPT liability might be, the surcharge is based on your income tax liability. Check to ensure that you have filed and paid your LPT return because if not it’s vital you sort it out before you file your tax return.
3. Pensions:
Making an additional pension payment before the filing deadline can reduce both your income tax liability for 2012 and preliminary tax for 2013. It basically means your money goes into your pension rather than into Revenue. The reduction in your tax will almost cover your pension payment.
If you underpaid your preliminary tax last year Revenue may impose interest on you, however a pension contribution now could bring you back within the preliminary tax limits thus avoiding the interest. In addition, a pension payment could turn a potential income tax liability into a refund situation which would mean no tax liability on which to apply the 10% LPT surcharge. Talk to your tax adviser to see if you can benefit from making a pension payment this year.
If you would like to discuss any of the above matters in more detail or discuss how the imminent budget changes are likely to impact on you, please contact us in complete confidence.
