Don't get the Halloween jitters around filing your tax return.

Avoid these 10 common mistakes when filing your return.

Claim the correct expenses

Only business related expenses can be claimed in your tax return so avoid including personal expenses like clothes, costs related to personal trips/holidays. On the flip side if you operate your business from a home office you can include a reasonable portion of running costs for the home as a business expense which helps to keep the tax bill down.

Not declaring Rental Income

Numerous people do not return the income from an investment property as they are of the opinion that it is making a loss. While you mortgage repayments may match or exceed the rental income you are only allowed to deduct 75% of the mortgage interest in any tax year meaning you could have a tax liability that you are unaware of.

Not making use of trading losses

As we emerge from a recessionary period many business would have incurred losses during these tough times. These losses can be carried forward to reduce any profits in the current and future years which can have a huge impact on your tax bill.

Not treating grant income correctly

Many business receive financial assistance/state support for their business throughout the tax year. Treating these grants correctly from a tax viewpoint can be a bit of a minefield. For example the JobsPlus grant which is paid by social welfare to businesses is exempt from tax and should be removed from your profits before you file the return.

Miscalculating USC

You may have been entitled to a medical card if your income was quite low during the tax year. For people who did hold a medical card the rate of USC which you pay on your profits is capped at the second rate which was 3.5% in 2015. 

Is your spouse a stay at home Mum/Dad?

If so you claim an additional tax credit worth €810 in 2015 called the Home Carers Tax Credit. This credit was increased to €1,000 in 2016 and will increase further to €1,100 in 2017. The stay at home spouse has to have been earning below an income threshold to claim the credit, the threshold was €5,080 in 2015.

Incorrectly claiming medical expenses

Many people assume that all medical expenses are allowable against your tax bill, unfortunately not! Routine dental visits and ophthalmic care are not allowed as a tax deduction. Also if any portion of a medical bill has been reimbursed by a medical insurer then this amount cannot be claimed in your tax return.

 Not declaring income from all sources

 Many people receive small amounts each year in share dividends, bank interest, credit union dividends etc. These amounts, however small, need to be included to ensure you are fully compliant.

 It is also important to note that the majority of payments from social welfare are taxable and should be included on your tax return.

 Assuming Revenue will automatically correct any errors on your return

Many people believe that once they have filed their return that if they don’t hear anything from Revenue within a couple of weeks that everything is correct, not so!

The onus is on the taxpayer to ensure that the tax figure they calculate is complete and correct. Revenue can choose returns from prior years to review and if they spot an error they will look for any underpayment of taxes plus interest and penalties for good measure!

Taking the DIY approach!

Tax legislation is very complex and is constantly changing. While the temptation is always there to go it alone and calculate your own tax bill, having an experienced accountant in your corner can save time, stress and most importantly money in the long run!

Date published 26 Oct 2016

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.