Personal Income Tax Audit

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dub1

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I recieved a letter yesterday from revenue saying that they conducting an audit of my income tax for 2006, 7 and 8. I think this may have been prompted when I claimed health expenses for 07, 8 and 9 last weekend(all legit, got eciepts etc).

My worry is that there are so many questions on the forms that I just wouldnt remember dates and figures for.

Also I owned a house from march 2001---Oct 2007(sole owner). I bought an apt with my partner in feb 2006. I moved out of the house when the apt was ready a few months later(with the intention of selling the house). There was a lot of work to be done on the house and I didnt sell it until August 2007. At no stage was it ever rented out. I subsequently sold the Apt around the same time. I also have to fill out a property portfolio form for revenue. Did I break any rules in owning both properties at the same time. As far as I know I didnt because I never rented my house out.
 
dub1 said:
I recieved a letter yesterday from revenue saying that they conducting an audit of my income tax for 2006, 7 and 8. I think this may have been prompted when I claimed health expenses for 07, 8 and 9 last weekend(all legit, got eciepts etc).

My worry is that there are so many questions on the forms that I just wouldnt remember dates and figures for.

Also I owned a house from march 2001---Oct 2007(sole owner). I bought an apt with my partner in feb 2006. I moved out of the house when the apt was ready a few months later(with the intention of selling the house). There was a lot of work to be done on the house and I didnt sell it until August 2007. At no stage was it ever rented out. I subsequently sold the Apt around the same time. I also have to fill out a property portfolio form for revenue. Did I break any rules in owning both properties at the same time. As far as I know I didnt because I never rented my house out.
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Is this a desk audit (i.e. by correspondence only), or are they coming out to meet you?

It's more likely it's based around the property (or something else), than the health expenses claim - they generally wouldn't initiate an audit just based on a health expenses claim, but would write out and just ask for the receipts.

Were you self employed in those years or a PAYE taxpayer?

Did you continue to claim TRS on mortgage interest on the house after you bought the apartment? - if so then this could be an issue, although you may have been entitled to interest relief on your share of the apartment, which would reduce any liability.

This may not be relevant, given that the audit is an Income Tax audit, but an issue that occurs to me is this:

Did you declare the sale of the house for CGT purposes when you were filing your tax return for 2007?

You sold the house in Oct 2007 - I presume for substantially more than you paid in '01 - This means there was a capital gain. The period that the house was your Principal Private Residence, as well as the last 12 months of ownership, are exempt for CGT purposes.

But based on the dates you've given, it appears you may be exposed to a (very small) CGT liability. Assuming the house was your PPR from March 01 - June 06, and you sold it in Oct 07, then there were 20months in between that it wasn't your PPR. The last 12 months are exempt, so this leaves 4 months that the house wasn't your PPR, and you would be liable for CGT on those 4 months.

So if you owned the house for 6 years 8 months (80 months), and you are taxable on 4 months, this means that you would be liable for CGT on 4/80ths or 5% of whatever gain was made... the CGT rate was 20% at the time, and the annual exemption is worth €254 of tax, so the worst case scenario in relation to that issue is not too bad (1% of the gain, plus a surcharge and interest).

Without knowing more about your circumstances, the type of audit etc, it's very difficult to give you any advice, but obviously if you had / have an accountant you should be speaking to them.
 
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