Contractor Tax Problem (Oh what have I done....)

D

daltonr

Guest
Hi

I started working contracts in March of this year after being let go in January from my regular job, and while the money was good it was very hard to get paid by the companies and I used a huge amount on my overdraft from month to month.

Now I'm looking at my finances and I realise that I earned € 26,043.95 this year and I only have a grand in my bank account plus 2 grand that is "in the post" I have estamated that I own around € 5,208.79 in tax and I have absoutly no way of paying this. Is this the definate amount that I have to pay or are their deductables that I can take from this. I'm in a really bad situation here.
 
Re: Oh what have I done....

I have estamated that I own around € 5,208.79 in tax and I have absoutly no way of paying this. Is this the definate amount that I have to pay or are their deductables that I can take from this. I'm in a really bad situation here.
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There are quite a lot of expenses that you could probably claim.
I would personally advise that you should talk to an accountant and let him/her have a look at your tax position.
It seems that you just took the €26k and mulitplied it by 20% and assuming that the €26k was your gross income(invoiced amount) I would be reasonably sure that your final liability will be quite a bit lower than this amount.


Conflict of Interest: I am a practicing accountant in private practice.
 
Re: Oh what have I done....

and I have absoutly no way of paying this.
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Take Jems advice and get an accountant to give you a solid figure that you owe. Then if you are still in trouble, you have two choices.

1. Try to get a small loan to cover it preferably over as short
a time frame as possible, e.g. 1 year.

or

2. (If absolutely all else fails) contact the Revenue Commissioners, and tell them you need to pay with installments. They'll charge you interest etc, but since it's only one years worth it's not going to be too bad.

You've caught it early and the scare will probably serve you well in terms of making better provision in the future. I had a similar scare and it did me the world of good, although I never would have thought it at the time.

-Richard
 
Re: Oh what have I done....

Hi david,

Before even deducting any expenses from your income, you would still have tax credits of about 1,800K to claim against the c5K figure you are getting.

Go see an accountant, he'll sort you out and put your mind at ease in about 30 minutes.

Good luck.
 
Thanks

Hi guys

Thanks for the advice, I spent some time with an accountant this morning and it's looking a little clearer now. I just got the fright of my life yesterday, and probably well deserved. I'm learning a lesson the hard way.

Thanks.
 
Re: Thanks

One other thing,

Once you get it cleared up, open a second account, and when you get paid by a client lodge to that account. Pay yourself a fixed amount each month.

-Rd
 
Yep

Yep,

Once he's sorted out, the easiest way to keep on the straight and narrow is to keep a business account and pay himself a fixed salary each month so that enough is left in the business account to cover Tax and VAT.

Obviously in a Ltd company situation that's essential, but sole traders are free to keep all their money in one account, and that can lead to this sort of problem.

It takes discipline though even if you separate the accounts. It's very easy for a sole trader to use money from that's been put aside for tax etc.

I was a solt trader and I certainly find it easier since I switched to a Ltd. Company, although I know many people suggest that the cost and regulations etc are not worth it.

It works for me.

-Rd
 
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