Filing income tax returns may be frustrating but it’s important to get them right. Although completion is annual, people still find the process confusing and most just want to get it over and done with. As a result, every year we see people miss out on tax relief because of simple mistakes. We want to help you save time and money by sharing the most common errors, and how they affect your taxes.
- Failing to file on time
A mistake which is all too common is missing the tax return deadline, this can result in interest and penalties which can bring about unnecessary additional cost. This is why we recommend you don’t leave filing your tax return to the very last minute. Also, failing to file your income tax return in the first place, is definitely one of the largest mistakes for anyone to make. Even if your business is not making profits in the first couple of years, you still must file a return. It is worth noting that losses can be used to offset profits in future years.
Those required to file income tax returns include contractors, landlords, taxi drivers, tutors, consultants, small business owners and proprietary directors, to name a few. Many people don’t realise they must register for self-assessment before they can ever file a tax return.
- Not declaring all income
What most people don’t realise is that not only does your self-employed business income need to be submitted into your income tax return but you also need to include any other income you have earned in the year. Such examples of other income which needs to be declared includes PAYE income, payments from the Department of Social Protection, dividends/deposit interest received and foreign income.
Even exempt income must be declared in a tax return! Depending on whether you are married or in a civil partnership or not, the income of your spouse must also be included if you are jointly assessed.
- Not taking advantage of all the tax credits available.
Hundreds of thousands of tax returns are filed with the Revenue Commissioners each year. Tax credits are not automatically applied, so you must apply for these yourself. We believe it’s better to be safe than sorry and recommend you seek professional advice to make sure you avail of all the tax credits applicable to you. Tax credits can save you a lot of money.
Most people settle for receiving one or two rather than claiming all the credits they are entitled too. Examples of credits you may be eligible for but aren’t well known, include the rental tax credit, (though you must have been renting continuously since 2010), the age credit for over 65s, the widow tax credit with dependent children, one parent family, home carer’s credit etc. Medical expenses can also be included. For more information see revenue.ie.
- Missing out on allowable expenses
Even the self-employed can have tax deductible work expenses. For example, if you use your personal car for essential business purposes, you can allow for the business expense. If working from home, you can also claim reasonable amounts for expenses such as heating, light and phone. Professional advice should be sought here as there may be other tax implications further down the road if you sell your home.
Other expenses you can claim tax back on includes fixed assets, e.g. computers and office furniture. Tax back is applied for these over eight years. Don’t forget, you must keep all receipts in a safe place in case Revenue calls on you for an audit.
- Not using a professional advisor
If you are unsure of what you are entitled to, it is worth seeking a professional to file your tax return and don’t forget that the fee you pay for this service is also tax deductible! Filing income tax returns is like getting your hair cut, it can be attempted by yourself but the end result generally confirms that you should have went to a professional!
We hope this helps you understand the process of filing income tax returns a little better! If you’d like to relieve the stress completely why not hand the task over to our expert team at Tax Return Plus. We take care of all the nasty bits, leaving you to simply enjoy the returns.