DIRT & Income Tax

[manning9]

Hello Group,

I posted on this topic a while back and thought I had the answer, however, my accountant has included the gross interest earned on deposits in calculating my Income tax. I had thought that DIRT satisfies all liability on deposit interest ? http://www.revenue.ie/en/tax/dirt/index.html

The calculation is (example figures)
Net Profit 30,000
Deposit Interest 5,000
Total 35,000
Less Capital Allowance -3000
Pension on Net Relevant Earnings 5,000
TOTAL 27,000

Tax at 20% of 27,000 = 5,400
Less Personnel Credit 1830
DIRT Credit 885
TAX 2,685

What I dont understand is why is Deposit Interest included as Income, when the Revenue say that ""D.I.R.T. is a final liability for income tax purposes, i.e. the
payment of retention tax at the standard rate by individuals liable to
income tax at the higher rate is regarded as satisfying the
individual’s full liability to this tax."

Thanks for your help. Confused sole trader.

 

[WaterSprite]

Re: DIRT & Incomer Tax

What happens is that deposit interest is included as income and your standard rate cut-off band is raised to take into account the deposit interest - presumably by some dark magic because DIRT is now at a different rate to the lower rate of tax. DIRT is your final liability. I have no idea why they do it this way.

If you want to see how it works, you can download the offline Form11 from the ROS site and do the calculations from that application.

 

[Breninio]

Re: DIRT & Incomer Tax

The interest income needs to be included as PRSI/Levies may be due.

 

[dockingtrade]

Re: DIRT & Incomer Tax

why i sthe DIRT credit 885? Should it not be 23% of 5000

 

[wonderlust]

QUESTION Re: DIRT & Incomer Tax

I am a PAYE worker and I filed a tax return this year on a Form 11E
I filled in an amount for interest earned in a deposit account in one of the sections.
I have now received a bill from revenue for outstanding tax.
They simply added the amount of interest I earned to my income for the year.
The amount being requested is 41% of the bank interest I received.
I'm confused to start with I guess I didn't realise tax was owing on this and if it is haven't I have already paid DIRT on this money so why would they use the gross figure?

 

[Graham_07]

Re: QUESTION Re: DIRT & Incomer Tax

I am a PAYE worker and I filed a tax return this year on a Form 11E
I filled in an amount for interest earned in a deposit account in one of the sections.
I have now received a bill from revenue for outstanding tax.
They simply added the amount of interest I earned to my income for the year.
The amount being requested is 41% of the bank interest I received.
I'm confused to start with I guess I didn't realise tax was owing on this and if it is haven't I have already paid DIRT on this money so why would they use the gross figure?

It looks like you completed the wrong section. If you completed Irish interest earned subject to DIRT then it would have been added to income but also added to standard rate cut off point and therefore taxed only at the standard rate. You would then have received credit for the DIRT paid with NIL tax resulting ( may be PRSI / Levies payable though ) . Check what you put on the form. If you completed it incorrectly then it can be corrected.

 

[wonderlust]

Thanks for the reply, I called the tax office today but didn't really get anywhere they seemed to think it wasn't a problem. Think I need to write a letter.