I dont understand Pre -tax........???

L

landlord

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On top of my basic income I receive rental income. According to the revenue website.....From the IT 10 form......

What is Preliminary Tax? Preliminary Tax is your estimate of your Income Tax payable for the year and mustbe paid by 31 October. In calculating your Preliminary Tax you should remember that it includes PRSI and Health Contribution as well as Income Tax.The amount of Preliminary Tax you must pay to avoid interest charges is the lower of:

A : 90% of your final liability for the current tax year or

B : 100% of your final liability to tax for the immediately previous year or

C : 105% of your final liability for the year preceding the immediately previous year. This option is only available where you authorise theCollector-General to collect tax by direct debit. The 105% rule doesnot apply where the tax payable for the pre-preceding year is NIL.

If my tax is approximately the same every year and I have to pay my pre tax for the tax year of 2008 by 31st October 2008 according to option A or B. I will end up paying tax for the whole year, at then end of October, before I have even received a whole years income....i.e. the end of December 2008? i.e. I am paying tax on money I havnt even earned yet!!
I must be missing something here?
thanks.....???
 
you are reading it right. you make a downpayment against your tax bill for 2008 in oct 2008 and this is offset against the final 2008 tax bill. 2008 income tax return has to be file by oct 2009 and any balance of income tax for 2008 paid along with preliminary tax for 2009.
 
Beckie said:
you are reading it right. you make a downpayment against your tax bill for 2008 in oct 2008 and this is offset against the final 2008 tax bill. 2008 income tax return has to be file by oct 2009 and any balance of income tax for 2008 paid along with preliminary tax for 2009.
Click to expand...

I cant seem to get my head around why you have to pay pre tax on money you havnt even earned yet?
If this is my first ever return then I would be using option A and paying 90 % of my expedted earnings from 01 Jan 2008 to Dec 31st 2008. I am able to earn money right up to Dec 31st 2008, however I have to pay 90% of my expected tax as pre tax at the end of October 2008. So I am paying tax on money I havnt even earned yet. What am I missing. ??
 
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