Following my redundancy last year I set up my own business and began to trade for myself. I believe the deadline for my 2010 Income Tax Return is nearing but I am unaware of my obligations with regards to this.
Firstly, I would like to congratulate you on your new business and wish you every success with it. As you are now a sole trader, you are required to file an annual income tax return and as you correctly say, the deadline for this is just around the corner. Income tax returns for 2010 are due for filing by 31 October 2011. However, for those filing and paying through Revenue’s Online Service (ROS) an extended deadline of 15 November is available. This deadline also marks the date to pay any balance of income tax due for 2010, together with preliminary tax for 2011. As this year is likely to be particularly challenging due to tax increases in recent Budgets and the reduction in cash-flow for most businesses, it is important to prepare now for the deadline.
The self assessment system here inIrelandplaces an obligation on the individual to file a return, calculate the tax liability, and pay the tax due. Returns must be filed before the deadlines outlined above to avoid a surcharge. The surcharge amounts to 5% of the amount of tax payable for the period subject to a maximum surcharge of €12,695, where the return is filed within two months of the deadline. Otherwise if the return is filed more than 2 months after the deadline, a surcharge of 10% is imposed subject to a maximum of €63,485. Preliminary tax due for the tax year 2011 must also be paid if interest charges of .0219% per day are to be avoided. Preliminary tax must represent 90% of the individual’s actual liability for 2011 or 100% of the final liability for 2010. Individuals making a preliminary tax payment in 2011 based on 100% of their 2010 liability will be obliged to include in that payment the amount which would have been payable had the Universal Social Charge applied in 2010.
Your 2010 income tax return should include details of all income earned by you in that year. This will include the employment income earned by you prior to your redundancy, the profits you made during the year as a sole trader and any other income such as rental income, deposit interest, dividends etc received by you during the year. Whether your income is taxed at the standard rate (20%) or the marginal income tax rate (41%) will depend on your standard rate band. The standard rate band for 2010 for a single person is €36,400; however this will increase if you are jointly assessed with your spouse. It is also important to note that you may be entitled to certain tax credits and reliefs. For instance tax relief is available on expenses incurred by you on pension contributions, medical expenses, service charges and donations to approved charities to name but a few.
Given the potential complexity involved, I would now advise that you consult a qualified taxation professional to assist you with the preparation and filing of your return, in order to ensure it’s completeness, guarantee all tax credits and reliefs available to you are claimed and aid you in the calculation of both your 2010 income tax and your 2011 preliminary tax liabilities.