Self-assessed tax returns: DIY or use an agent?

Like visits from the grim reaper, there is never a convenient time for taxes. But for the nearly 300,000 among us who are self-employed, as well as the many thousands more who have non-PAYE sources of income to declare, it’s not like you haven’t been warned.

The tax-return deadline date of October 31 is well flagged every year by the decent folk at the Revenue Commissioners and, thanks to the ROS (Revenue Online Service) website, those who file online instead of by snail mail benefit from another two weeks’ grace.

But doing your tax returns is likely to be among those jobs that you might perpetually put on the long finger, with the risk that you may miss the deadline and have to pay financial penalties.

According to recent research by tax-return specialist firm taxback.com, about 20% of self-employed taxpayers are expected to miss the pay-and-file deadline.

If you do file late but within two months of your deadline passing, there is a 5% surcharge on the amount of tax liable, subject to a maximum of €12,695. If you’re more than two months’ late, a 10% surcharge kicks in, with a maximum fine of €63,485.

1 Can I not just get an accountant to do it?

Of course, and you certainly wouldn’t be the only one. The Revenue tells us that of the nearly 430,000 tax returns (forms 1 and 11) filed for 2009, more than 345,000 — or 80% — of them were filed through an “agent”. This means that only about 80,000 of us would file the returns ourselves.

However, if you are only submitting all the necessary information to your accountant the day before the deadline, then don’t expect him or her to be able to file the return in time. This is the busiest time of the year for them, after all.

Many will ask that you file at least a week or two before the deadline, but preferably much earlier. Most firms will file returns online, which means they would have until November 15 to file.

2 I’ve never filed a tax return myself before, but is it possible that I could end up paying more tax than I should because I made a mistake or overlooked something?

“Every year, a lot of people make mistakes on their tax returns, which means they often end up having to get an accountant to look over their tax return in the end,” says Christine Keily, senior personal tax manager at taxback.com. “It saves time and money to use a professional at the outset.”

Anthony Casey of accountancy firm Noone Casey says many self-employed people make mistakes when calculating the tax-deductible expenses.

“A good accountant will advise on the correct expenses to be charged,” he said. “For example, many self-employed or small company businesses operate from the family home.

“The accountant will advise on the level of household utility bills that can be used to reduce the taxable profit of the business.”

Most accountants will probably make similar pitches, but working with one might not be a bad idea if you’re doing it for the first time. They can also help navigate you round the tricky issue in 2011 of how to apply the new Universal Social Charge (USC) to your preliminary tax.

If your tax affairs turn out to be fairly straightforward, then you could try doing it yourself the next time.

3 How much would I expect to pay an accountant to do it for me?

In general, what most accountants charge for calculating and filing a self-assessed tax return depends on your personal tax circumstances and what you want them to do.

Some firms and individuals charge by the clock, which usually means that while they have a basic fee, this can rise depending on the complexity of your tax affairs and how much correspondence is needed. So while you can expect to be charged at least €200-250 for a simple tax return, it may rise if your accountant has to chase up information from you.

Some firms, such as Early Bird Tax Returns, offer cheaper rates if you can submit all your information before July, August or September.

Other firms offer a flat-fee structure. Taxback.com, for instance, offers a number of flat-fee services ranging from €99 to €400, excluding VAT. “We initially assess the person’s tax requirements and then calculate the cost of filing their tax return,” says Keily.

An alternative to a traditional accountant or firm is to use an online service like Paylesstax.ie, which essentially guides you through the process of filing a self-assessed tax return online yourself, at a fixed cost of €149 including VAT.

“Our online systems are human-proof once you follow the very easy menu systems, so nothing can be overlooked, particularly when rushing towards the end of the tax deadline,” says Cathal Maxwell of Paylesstax.ie.

4 OK, well I’m not self-employed, but I do now have one or two things to declare, plus some tax reliefs to claim too. Should I get somebody to do that too?

You might be surprised to learn that more and more PAYE taxpayers are using agents to do the simple stuff too, according to the Revenue. In 2009, around 240,000 submissions by PAYE taxpayers were linked to an agent.

But unless the idea of even contemplating anything to do with personal tax without lifting the phone to your friendly accountant has you breaking out in cold sweat, our advice would be to do it yourself. It’s not so complicated that you are likely to miss anything that would result in you losing out, financially.

5 Is making simple tax claims really that simple?

In most cases, yes. If you have tax-form phobia, then we might not be able to convince you of that here, but at the very least check out the ridiculously easy-to-use Revenue online portal called PAYE Anytime.

Designed specifically for PAYE taxpayers, you can use this portal to manage your tax affairs in much the same way as online banking can help you manage your bank accounts without having to visit a branch.

Once you have signed up (and more than 615,000 people already have), you can claim most of your tax credits, re-allocate credits between yourself and your spouse, declare additional income, request certain forms and apply for tax refunds, such as health expenses, among other things.

You can even access most of this stuff using your phone.

Case study

Before he retired a number of years ago, Sean O’Meara was chief executive of advertising agency, Young Advertising, for 15 years.

Since retiring, he has undertaken some occasional consultancy work and also built up some income from other sources, so he needed to start filing self-assessed tax returns.

Initially, he used a tax consultant to help him file his returns, as he felt he needed the advice and guidance.

That changed when he came across paylesstax.ie, an online tax-return service that assists users in filing their own tax returns themselves.

Now Sean uses paylesstax.ie exclusively, and has done for the last three years.

“I like it because it simplifies everything for me, guides me through the procedures with clarity and I feel reassured that everything is complete when I am finished,” he said.

It has also saved him a few bob. “I have saved money because I relied greatly on the advice offered, and obviously still do, and for me that’s an important, essential part of the package,” said Sean.

“In a way, you could say that it’s like having a real, live tax consultant on the screen with me, and I need that support.”

This article first appeared in the Irish Independent