When preparing and submitting Form 12, it is crucial to be aware of common mistake areas to ensure compliance and optimal financial management.
In Form 12 Updates, Naomi Butler explores some common mistake areas in Form 12 preparations and submissions, including the accurate recording of social welfare payments like old age pensions, filing childcare income exemptions on the correct form, reassessing the relevance of flat rate expenses on tax credit certificates, documenting travel and subsistence claims, and calculating remote working relief.
1. Accurately Recording Social Welfare Payments
One of the frequent errors involves the incorrect recording of social welfare payments, particularly old age pensions. It is essential to ensure that these payments are accurately reflected in the tax returns. For instance, if a husband receives an old age pension and has applied for a qualifying dependent in relation to his spouse, the entire pension amount should be recorded under his name in the income tax return. The payments should not be split between the husband and wife, even if the money is deposited into the spouse's bank account. This precise recording helps avoid discrepancies and potential issues with Revenue authorities.
2. Filing Childcare Income Exemptions Correctly
Another area prone to mistakes is the filing of childcare income exemptions. The exemption allows up to €15,000 to be earned tax-free for providing childcare services, such as grandparents looking after their grandchildren. However, this exempt income must be reported on Form 11, not Form 12. This requirement can be confusing because other types of exempt income, like rent-a-room relief, can be reported on Form 12. Ensuring that childcare income is correctly filed on Form 11 is crucial to avoid penalties and ensure compliance.
3. Reassessing Flat Rate Expenses on Tax Credit Certificates
Taxpayers often overlook the need to reassess flat rate expenses listed on their tax credit certificates. These expenses should be relevant to the taxpayer's current employment situation. For example, a proprietary director of a company might find an outdated flat rate expense related to a previous job, such as a mechanic's expense, still listed on their certificate. Continuing to claim such irrelevant expenses can lead to significant liabilities, including interest and penalties. Therefore, it is vital to review and update flat rate expenses annually to reflect the current employment context accurately.
4. Documenting Travel and Subsistence Claims Carefully
Travel and subsistence claims are another area where taxpayers frequently make errors. If an employer reimburses less than the civil service rates for business travel, the difference can be claimed. For instance, if an employer pays 15 cents per kilometre while the civil service rate is 30 cents per kilometre, the taxpayer can claim the additional 15 cents per kilometre. It is essential to keep detailed records of all qualifying business travel to support these claims. Proper documentation ensures that taxpayers can claim the full allowable amount and avoid disputes with revenue authorities.
5. Precisely Calculating Remote Working Relief
With the rise of remote working, accurately calculating remote working relief has become increasingly important. The calculation should be based on the actual number of workdays, excluding annual leave and bank holidays. Typically, the average working year consists of 260 days, but this can vary slightly due to leap years. For example, after deducting 20 days of statutory annual leave and 10 bank holidays, the number of workdays would be 230.
When claiming relief for light and heat expenses, the calculation should be 230/365 multiplied by 30%, less any reimbursement from the employer. For broadband costs, only the portion directly related to work should be claimed. If the broadband package includes TV and phone services, the cost should be prorated to exclude these non-work-related expenses. Accurate calculations and proper documentation of these expenses are essential to maximize relief and ensure compliance.
Avoiding common mistakes in Form 12 submissions requires careful attention to detail and a thorough understanding of the specific requirements for each type of claim. By accurately recording social welfare payments, filing childcare income exemptions on the correct form, reassessing flat rate expenses, meticulously documenting travel and subsistence claims, and precisely calculating remote working relief, taxpayers can ensure compliance and optimize their financial management. Staying informed and attentive to changes in tax regulations is crucial for preventing errors and avoiding potential penalties.
For the full session, please click here. During this course Naomi Butler covers areas of common mistakes, where Revenue appear to be requesting additional information and other areas of note.
The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article.
