# Accountant - over complicating things



## DoingMyBest (8 Aug 2010)

I am a full time PAYE worker. My wife has worked part time since 2006. I earn around 60k a year. Her earnings vary but they are around 10k a year after expenses. My wife paid no tax or PRSI since she started part time work. We went to an accountant to fix this up. We agreed to let our accountant act as our tax agent. Our accountant suggested that we assess jointly for tax, and that I should set myself up as my wife's employer. This would bring us into the lower tax band. We have received a large tax refund as a result of this. Our accountant has charged us a lot of money for this service. We have had to pay him up front in advance of any refund, which has been difficult for us.

   I have a few worries. My wife has not been set up as having paid any PRSI and now comes in under class M. I would have preferred her to be set up under class S PRSI. I think my accountant is looking to make as much money as possible out of us and that is why he is doing things the way he is. Would it be easy for my wife just to do her own books in future and forget about this complicated arrangement ? We are afraid of a tax audit down the line. I also want to make sure that my wife pays PRSI so that she can get a pension down the line.

What would you do in my situation ?


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## Tentman (8 Aug 2010)

First things first. Your wife cannot pay PRSI at S rate if she is employed by you. Class S is for self-employed plus a few others. I would run a mile from a money-grabbing proffessional. He should not have looked for money up front, bar,maybe a small deposit. If your wife is working for an employer other than you, then that employer would/should have made the appropriate deductions for PRSI & Tax. On an income of €10,000, there would be very little of either to be paid. If I were in your shoes, I would withdraw from that accountant asap. You can get all the info you require from your local tax office, and for free. They are very helpful. Also check out your wife's P60 forms for 2006/07/08/09 and bring them with you to the Tax Office. There is nothing mysterious about all this and I'm sure you will find the tax office most helpful. Have a look at the Revenue website and also the Welfare site. There's a mine of info on those sites.


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## Pat Bateman (8 Aug 2010)

Tentman said:


> First things first. Your wife cannot pay PRSI at S rate if she is employed by you. Class S is for self-employed plus a few others. I would run a mile from a money-grabbing proffessional. He should not have looked for money up front, bar,maybe a small deposit. If your wife is working for an employer other than you, then that employer would/should have made the appropriate deductions for PRSI & Tax. On an income of €10,000, there would be very little of either to be paid. If I were in your shoes, I would withdraw from that accountant asap. You can get all the info you require from your local tax office, and for free. They are very helpful. Also check out your wife's P60 forms for 2006/07/08/09 and bring them with you to the Tax Office. There is nothing mysterious about all this and I'm sure you will find the tax office most helpful. Have a look at the Revenue website and also the Welfare site. There's a mine of info on those sites.


 
Did you even read the OP's post?

The accountant didn't look for "money up front". The OP's complaining about the accountant looking for his fee in advance of the OP receiving his refund (when in fact the two things shouldn't be linked at all).

OP, I have to say I find your attitude perplexing. You engaged the services of an accountant. He tidied up the structure of your tax affairs which resulted in you receiving a "large refund". You'll clearly pay less tax for subsequent years also. Now you're moaning about having to pay him for what seems to have been good work. Does that not seem unreasonable to you?


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## Tomorrow (8 Aug 2010)

I have to agree with Tentman.

Your wife cannot be employed by you. You say you are a PAYE worker, is your wife also a PAYE worker or is she self employed? 

I really dont understand what your accountant has done, however, we only have one side of the story here.

I would advise that you consult either the revenue or get recommendations for another accountant who can check what has been done.


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## Pat Bateman (8 Aug 2010)

Tomorrow said:


> I have to agree with Tentman.
> 
> Your wife cannot be employed by you. You say you are a PAYE worker, is your wife also a PAYE worker or is she self employed?
> 
> ...


 
There's clearly more to this than meets the eye.  The OP may be a proprietary director of a limited company.  Perhaps he would clarify?


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## DoingMyBest (8 Aug 2010)

Pat Bateman said:


> There's clearly more to this than meets the eye. The OP may be a proprietary director of a limited company. Perhaps he would clarify?


 
Hi Pat. No, I am a PAYE worker. It's just me and my wife. She works for a religious organisation. She was a permanent member of staff but left in 2006. From that date on she has only worked occasionally, but has not paid tax or PRSI. I got involved with an accountant to try and get her tax and PRSI affairs up to date. We gave him authority to act as our tax agent. He then suggested the scheme whereby I am set up as my wife's employer. By paying my wife a salary, it reduces my income and pushes my tax liab to the lower rate. I am not grumbling about the tax refunds that we have received out of this. However, I am afraid of a tax audit, and not knowing how this will wash with the revenue. I am also unhappy that my wife is now designated as class M PRSI - with no pension entitlements, as a result of the way things have been done.


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## Brendan Burgess (8 Aug 2010)

This seems very odd indeed. 

How much did your accountant charge for this? 

Did he put the proposed advice in writing? Did you understand it or did you just implement it blindly? 

As an accountant set up this structure for you, if the Revenue are not happy with it, then you would have a case against the accountant. 

If you are unsure about the advice put your concerns to him in writing and get his response in writing.

I agree with your overall heading. It's way too complicated for such a small amount of earnings. I would have thought that being jointly assessed would have achieved the same end result.

Brendan


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## DoingMyBest (8 Aug 2010)

Thanks Brendan. He is charging us €5k per year. We are getting revenue refunds of roughly double this per year.
We got everything in writing. It seemed like a good idea to us as it tidied up our affairs. I am not interested in making money from the revenue. We would be happy to tidy up the tax affairs, pay PRSI and just break even. We went into this a bit green if I am honest.


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## Brendan Burgess (8 Aug 2010)

I think it's very generous of you to describe this as "overcomplicating" things. 

You are entitled to the refunds anyway. You should not need to pay €5k a  year to get them.

Brendan


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## Pat Bateman (8 Aug 2010)

DoingMyBest said:


> Thanks Brendan. He is charging us €5k per year. We are getting revenue refunds of roughly double this per year.
> We got everything in writing. It seemed like a good idea to us as it tidied up our affairs. I am not interested in making money from the revenue. We would be happy to tidy up the tax affairs, pay PRSI and just break even. We went into this a bit green if I am honest.


 
This does sound odd. Fair enough if they charged you for their time incurred in relation to sorting out your affairs. But there shouldn't be a €5K recurring charge. For basic annual compliance (with the figures you've cited) €1,000 + VAT a year would be the norm (it might even be on the high side).

Are you set up as some kind of self employed contractor now?  It sounds like it.  If your wife is "your employee" then in order for you to be entitled to a trading deduction for her salary, she's required to actually be doing something.

Again, this actually does all sound very odd.


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## Tomorrow (8 Aug 2010)

I agree with the other posters.

I am finding it hard to believe that an accountant would charge so much for a very simple job. 

It seems from what you have said that you are now registered as self employed. However your wife cannot be employed by you, which is why you are having the difficulty with the PRSI.

I suspect what should have happened was that your wife be registered as self employed and the two of you be jointly assessed which would have resulted in the refunds and a much much smaller bill.
This kind of job should cost a few hundred.

I would advise you to get someone independent to look at this. As I said above an accountant reccommended to you.


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## Paddy199 (9 Aug 2010)

Hi,

You paid €5k to get your affairs sorted and get professional tax advice. It looks like you achieved both. Now you are free to move to another professional with this advice. Just because he is currently your tax agent does not mean you can't move to another tax agent (or that you have no tax agent and you do your returns yourself). 

However, maybe the €5k was on the high side to start with, maybe you went to a very reputable tax professional who has a charge out rate to match. He should have being upfront about this however, did you sign a tax engagement letter? How is the fee calculation referred to on it? Is the fee stated? Did you even get a tax engagement letter?

I also wouldn't worry about a Revenue Audit - if he is your tax agent, has set up a structure for you and you have it in writing, you can pursue him for damages as a result of any negligent work he has done for you. So, keep all correspondence from him safely.


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## censuspro (9 Aug 2010)

DoingMyBest said:


> Hi Pat. No, I am a PAYE worker. It's just me and my wife. She works for a religious organisation. She was a permanent member of staff but left in 2006. From that date on she has only worked occasionally, but has not paid tax or PRSI. I got involved with an accountant to try and get her tax and PRSI affairs up to date. We gave him authority to act as our tax agent. He then suggested the scheme whereby I am set up as my wife's employer. By paying my wife a salary, it reduces my income and pushes my tax liab to the lower rate. I am not grumbling about the tax refunds that we have received out of this. However, I am afraid of a tax audit, and not knowing how this will wash with the revenue. I am also unhappy that my wife is now designated as class M PRSI - with no pension entitlements, as a result of the way things have been done.


 
How did you get a deduction for paying your wife a salary if you are a PAYE worker? Would be interesting to know what structure your accountant set up. Can you provide more details?

The Fee does sound high. Are you using one of the larger firms?


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## DoingMyBest (9 Aug 2010)

I don't pay my wife physically. It just shows as a salary on her books at the end of year and a deduction from my income. Yes. I have been using one of the larger firms. I think they do corporate stuff as well for other clients.


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## J.Ryan (9 Aug 2010)

The theory behind it is interesting, are they treating the "payment" to your wife as a charge on your income?


The bad news, when dealing with the big 4, or even top 20, a 5K fee is considered low.


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## censuspro (9 Aug 2010)

DoingMyBest said:


> I don't pay my wife physically. It just shows as a salary on her books at the end of year and a deduction from my income. Yes. I have been using one of the larger firms. I think they do corporate stuff as well for other clients.


 
Can you tell us what type of deduction it is, I'd be interested to know how they structured this. Maybe the they are classifying it as a maintenance payment?


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## DoingMyBest (9 Aug 2010)

censuspro said:


> Can you tell us what type of deduction it is, I'd be interested to know how they structured this. Maybe the they are classifying it as a maintenance payment?


 
Not sure. It shows up on our joint I&E as Wages ?


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## Mpsox (9 Aug 2010)

This just sounds too good to be true and for that reason I'd suggest getting a 2nd opinion from another tax professional. A simple issue jumps out straight away, if your marriage broke up, then in addition to any claim for maintenance, it would mean that your wife could be entitled to redundancy !!


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## DoingMyBest (9 Aug 2010)

Thanks. That's a good point, and I hadn't thought of it.


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## Pat Bateman (9 Aug 2010)

Hi there,

This structure sounds very odd to me.

My understanding is that:


You're 'just' a PAYE worker and not a self employed contractor or a proprietary director of your own limited company.
Your wife is a sole trader.
Your accountant has set up a structure whereby your wife is employed by you which is 'saving' you €10,000 per annum.
For the above, your accountant is charging you €5K per annum.
Is the above correct?  Are you now registered as self employed and invoicing whoever she provides services to?


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## Joe_90 (9 Aug 2010)

I would really like to hear this structure.
1.  If you are a PAYE worker where does the joint Income & Expenditure fit in.
2.  Wages to a partner are added back and reassessed on that partner as Self employed income thereby being subject to Class S PRSI.


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## Paddy199 (10 Aug 2010)

Sounds like a very good structure that has been devised by some big practice. With a tax write off on the €5k, the fee will in reality be much less. The structure could possibly have been explained to him a bit better, but apart from that, I see no problem at all with it. 

When a reputable practice suggests a structure like this, its obviously something they are willing to stand over. Other posters here are probably dying to know the ins and outs of it.


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## Pat Bateman (10 Aug 2010)

Paddy199 said:


> Sounds like a very good structure that has been devised by some big practice. With a tax write off on the €5k, the fee will in reality be much less. The structure could possibly have been explained to him a bit better, but apart from that, I see no problem at all with it.
> 
> When a reputable practice suggests a structure like this, its obviously something they are willing to stand over. Other posters here are probably dying to know the ins and outs of it.


 
Famous last words, but I'll be shocked if this "structure" is legitimate (unless the OP isn't explaining it correctly).


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## MandaC (11 Aug 2010)

Paddy199 said:


> Sounds like a very good structure that has been devised by some big practice. With a tax write off on the €5k, the fee will in reality be much less. The structure could possibly have been explained to him a bit better, but apart from that, I see no problem at all with it.
> 
> When a reputable practice suggests a structure like this, its obviously something they are willing to stand over. Other posters here are probably dying to know the ins and outs of it.



I have not heard of that particular structure, but am not surprised that it may exist either.  A tax practice I worked in devised a cash extraction scheme for shareholders which was quite long and convoluted, but it was legal.   It also was expensive to the client. 

Other practices were always trying to challenge it and asking for details (to see how it worked) obviously to copy it, but no can do.  Agree a 5k fee is not huge either.


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## censuspro (11 Aug 2010)

MandaC said:


> I have not heard of that particular structure, but am not surprised that it may exist either. A tax practice I worked in devised a cash extraction scheme for shareholders which was quite long and convoluted, but it was legal. It also was expensive to the client.
> 
> Other practices were always trying to challenge it and asking for details (to see how it worked) obviously to copy it, but no can do. Agree a 5k fee is not huge either.


 
I'd love to know how they structured that. I just can't see where the scope is for a PAYE employee.

Maybe the OP could give us more details?


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## Pat Bateman (11 Aug 2010)

MandaC said:


> I have not heard of that particular structure, but am not surprised that it may exist either. A tax practice I worked in devised a cash extraction scheme for shareholders which was quite long and convoluted, but it was legal. It also was expensive to the client.
> 
> Other practices were always trying to challenge it and asking for details (to see how it worked) obviously to copy it, but no can do. Agree a 5k fee is not huge either.


 
Cash extraction schemes exist because the underlying transcations are relatively complicated.  The OP's circumstances are uncomplicated.  Therefore it's hard to see how it can be legitimate.  Having said that, I'm open minded.


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## Paddy199 (12 Aug 2010)

Look, the OP has missed some key elements of this. Tax practitioners at that level are experts in devising schemes around anything. Thats why Revenue introduced section 811 and section 811A to prohibit practitioners devising schemes which are not in the best interests of Revenue. Surely the best piece of tax legislation in history!!


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## censuspro (4 Sep 2010)

Paddy199 said:


> When a reputable practice suggests a structure like this, its obviously something they are willing to stand over. Other posters here are probably dying to know the ins and outs of it.


 
It was also a reputable practice that devised an elaborate strucutre of transactions that allowed developers to avoid paying millions in VAT. This elaborate structure was challenged and won by the revenue in 2005 and an assessment was raised on the tax payer.


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## Paddy199 (6 Sep 2010)

I suggest that Director never made partner then!! 

There are many more structures devised that do stand up to Revenue challenges.
In fact, Revenue introduced section 811A because reputable practices are always one step ahead of Revenue. And when they intoduce new legislation, the horse has bolted. This section along with 811 are unconstitutional and will be challenged eventually by someone.


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