2004 tax return

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Scouser

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My 2004 tax return from my accountant says I earned 34,165.00 gross and owe 6,745.10 in tax. Im self employed, and looking through my books I took 21,804.97 net for 2004.

If my salary was 34,165.00 and i pay 6,745.10 in tax surely this means my net should be 27,419.90? Am i missing somthing or is the return wrong?

X
 
Well it could be wrong but it's impossible to tell from the information you have posted.

You say you took out 21,804 from the business. However not all of the running costs you have on your version of the books may be deductible.

The net income figure for tax purposes is your total turnover less allowable expenses, including capital allowances. This is not necessarily the same as what you drew down in salary as there may be non-allowable expenses on your books.

You really should ask your accountant to clarify as s/he has access to all the information and after all prepared your return!
 
Not being smart but how did your account explain this? Did s/he give you a detailed breakdown of all deductions and calculations which reconcile the net and gross figures? Is the c, Eur7K figure tax only or tax and PRSI? Are there pension contributions included in the gross salary figure?
 
The tax figure includes PRSI. My concern is the difference in what i make my net incomce to be and what my accountants figures say. I have only received the computation this evening and will talking to them tomorrow.
 
You are confusing personal drawings from the business with the taxable profits you make in the business. The two are not the same. For example if you end up with €10,000 more in stock at the year end than you had at the start of the year, everything else being equal this will increase your profits by €10,000 but will not affect the amounts you withdraw from the business over the course of the year.
 
ubiquitous said:
If you end up with €10,000 more in stock at the year end than you had at the start of the year, everything else being equal this will increase your profits by €10,000.
Click to expand...

Are you sure? What if all expenses incurred in producing the extra 10k of stock are allowable against tax? Would that not mean that there would be an increase in the business's assets, but not necessarily its profits?

Apologies if I'm wrong about this!
 
I used this as a simple, and not necessarily realistic, example, qualified by the "everything else being equal" proviso
 
Oh, right. It's just that "all else being equal" your example above in fact COULD and probably WOULD result in a different tax bill.


ubiquitous said:
I used this as a simple, and not necessarily realistic, example, qualified by the "everything else being equal" proviso
Click to expand...
 
Maybe he meant to say that the 10k of stock would decrease profits.
 
Okay, let me explain my point by turning the previous example on its head.

If a business finds that some of its stock at the year end is valueless because it is obsolete or out of date (foodstuffs in a restaurant kitchen, for example) this will depress its taxable profits.

If a business finds that some of its debtors are bad debts this will also depress its taxable profits.

Neither of the above will have any effect on the levels of drawings extracted from the business by the proprietor(s).

So taxable profits are NOT the same as drawings.

QED as my maths teacher used to say.
 
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