Back tax obligations

[danash]

Hi,

This might sound a little naive but can someone steer me in the right direction here.

Last December I listened to the press campaign about claiming tax relief on medical expenses and submitted a claim for almost 1200 euro in medical bills. I have now received a demand from the revenue that instead of the c500 euro cheque I was expecting that I in fact owe them 9000 euro. This is made up of underpayment of tax by my wife who was operating as a sole trader/ self employed contractor during the period. As her accounts were prepared by a Chartered accountant who also prepared her P60 and advised the amounts of tax due I was under the impression that all my PAYE was up to date.

It now seems that the accountant wrongly applied tax credits to my wife's income and as a result the underpayment occurred.


What are my rights/obligations here ? I was working on the assumption that an accountant producing a P60 would be as compliant as any payroll department in applying the correct tax credits.

Do I have a comeback against the accountant ?

Will the revenue listen to me and waive at least the penalty element of the demand - I am happy to pay the legal amount of tax due ?

Is it better to deal with the revenue as an individual or via another accountant/tax consultant - what usually achieves a better outcome ?

The horror element of this is that was for 2002 and I may have similar liabilities for the subsequent years.

I look forward to your help.

 

[deem]

if the liability arises then you will have to pay it. I would suggest that you contact the accountant in question and insist that they refund part of fee or all of fee paid to them in relation to this work. In addition if you requested them to file your return i would also insist that they pay the interest due if any.

If not then i'm afraid you'll just have to pay it.

You should get someone to sor the later years too or be in for a shock as the revenue will probalby requiest the returns for later years too.

You could go to your accountant and suggest they do it for free

 

[daveccork]

are you sure that the €9,000 is correct ? Seems quite a large error to be "tax credits" (does it include interest etc?).

Did you question your existing accountant as to the accuracy of this demand? If you are not happy with your existing accountant then a second opinion may be a good idea.

As deem said - you will have to pay this amount but be sure that it is right!

 

[danash]

As I said i am happy to pay the tax due - the 9000 is made up of Interest and penalties. The initial underpayment was quite small but as I was a director of her company I was penalised by 10% of my earnings ! Doesnt seem fair but that seems to be the formula.

Does anyone have any advice/had success in negotiating down a penalty amount ?

Would a personal approach work better than an accountant mitigiating the bill ?

I am currently suing the accountant as he has absolved himself of any responsibility.

 

[ClubMan]

Does anyone have any advice/had success in negotiating down a penalty amount ?

Would a personal approach work better than an accountant mitigiating the bill ?

I suspect that getting professional advice would be the best option.

 

[ubiquitous]

As I said i am happy to pay the tax due - the 9000 is made up of Interest and penalties.The initial underpayment was quite small

This doesn't really add up, unless the error was made maybe 10 years ago. Statutory interest is approx 10%-12% p.a. (cant remember which, offhand) and takes many years to gross up a liability from a small liability to a big one - certainly more than the 4 years you mention (2002-2006).

The issue of penalties on top of the interest should only be an issue if you have been formally audited by Revenue. Again the max penalty for "deliberate default" is 100% of the tax, and this is normally subject to mitigation, and/or significant reduction where the offence is downgraded to one of "gross carelessness" or "insufficient care"

but as I was a director of her company I was penalised by 10% of my earnings ! Doesnt seem fair but that seems to be the formula.

This appears to be the 10% surcharge on late- or non-filing of your directors tax return. This surcharge is indeed incredibly harsh, as it is applied on your total tax liability on all income from all sources (including PAYE income). Because of its harshness, Revenue often choose not to apply it to the letter in individual cases (at least in full). I would also count it as very rare for interest to be applied on the surcharge itself, which is why your story puzzles me. That said, filing your tax return is your responsibility, and it is generally difficult to evade this responsibility by trying to pin this on an accountant or someone else.

I am currently suing the accountant as he has absolved himself of any responsibility.

Again, its not at all clear whether the accountant has any responsibility for what has happened. Remember, the whole problem has been triggered by your own action in filing a tax return over 3 years late. In general, threatening to sue somebody is not the best reaction to such a problem arising. You would have been much better off working with the accountant to try to persuade Revenue to waive the late filing surcharge, if this is the root of the problem. (its hard to tell based on the limited and apparently contradictory information you have given).

I am alarmed that you seem to have cut off your nose to spite your face by attempting to sue before you have even explored the possibility of having the surcharge and/or other penalty cancelled in the first instance.