Sole trader - advice please

[CeciMcM]

Hi

my husband is a sole trader, but has not paid any tax for the past 4 years - its a long story, he's been suffering from depression, and despite many rows etc, has not submitted any tax returns. For the previous 5 years before that, he finally did submit returns, but it is a crippling amount that we are paying back, that we managed to get a credit union loan to pay off the tax from those years. Anyway, he is finally tackling the past 4 years, but has not kept any receipts or expenses or anything. The accountant is saying he must therefore pay tax on all his earnings. Does anyone know how much this will be? His income is only about 18,000 a year.

I'm so worried - I think we are going to be saddled with another massive tax bill, and this time we cant go to the credit union for the loan. We want to try and apply for the affordable housing scheme, so need to get a tax clearance cert asap. So therefore, somehow we are going to have to come up with the money arent we.

I'm wondering also, if it is possible to 'de-register' as a sole trader. We are wondering if it would be actually more beneficial for him to get a 'job' where the tax is deducted at source, rather than to have to face these tax bills every year.

If anyone can advise, I'd be really grateful.

 

[Graham_07]

1) if he can get a PAYE employment then yes he can de-register. The accountant you are dealing with can assist with that.

2) Unfortunately with no back up, it is difficult for the accountant to claim for expenses although if it is clear that costs to a certain amount would have had to be incurred to do the work he was doing then it may be possible to allow for that. Again the accountant should be able to help.

3) if, at the worst, the entire €18,000 pa is taxable income, then it depends on household income ( if you are jointly assessed) as to what the final bill may be. You'd need to give details of any other income , i.e. are you also working, are you using the joint tax credits etc. before any meaningful estimate could be given. However I'd recommend that you voice these concerns to the accountant who might be best placed to give you an estimate before any returns are filed so that you can be prepared.

 

[CeciMcM]

Thanks for reply Graham. Yes, I'm a PAYE worker, and pay my own tax - we've never been assessed jointly - husband has always been in too much of a mess with his affairs etc. I dont think I have any credits I can pass over to my husband - I think I use them all myself, if you know what I mean.

I think the accountant is reluctant to "estimate" any expenses, as he says that husband is at risk of being audited, because he has been so scatty in his tax returns, so it would be too risky. How would I be able to estimate a tax bill on his 18,000, if its not too complicated to work out.

It just seems like a ludicrous situation - we are very broke, and struggling - dont even own a house. Husband doesnt earn very much anyway - he minds our daughter quite a lot. And then we get landed with these big tax bills, which we struggle to pay, and end up paying out of my already taxed income. no wonder husband gets depressed about the whole thing. Just wish we could 'get on track' if you know what I mean. After we get these past 4 years "sorted" maybe we could pay monthly or something like that.

Many thanks

 

[Graham_07]

A person with annual income of €18,000 being singly assessed each year for the last 4 years could have liabilities of :-

2007
Tax €18,000 x 20% €3,600 - tax credit €1,760 = €1,840 tax
PRSI €18,000 x 3% = 540 PRSI ( is under the threshold for the 2% levy )
Total €2,380

2006 Total €2,510 + 10% late filing and any interest/penalties
2005 Total €2,560 + per above
2004 Total €2,620 + per above

The above are for guidance only and you should of course get properly completed figures from the accountant.

It is possible to pay income tax for a current year by direct debit.

I sympathise with your situation, however it sounds like your husband is not cut out for self-employment and is unable to handle his obligations. Getting depressed from something which arises as a result of his initial inaction anyway is a vicious circle from which it is difficult to break free.