IF you are earning a little bit of extra income on the side, then beware. As revealed by this newspaper last month, the taxman is on the prowl for PAYE workers who are doing ‘nixers’ – like piano lessons, car repairs at weekends and grinds – to ensure tax is being paid on this income.
Tax officials are scouring notice boards in shops and community centres and poring over local newspapers to see who is offering the likes of grinds, or which tradesmen are advertising to do extra work for cash
and people driving taxis.The Revenue wants to ensure those whose main income is through the PAYE (pay as you earn) system are also paying tax due on any income earned outside the PAYE system.
More and more people are relying on income outside of the traditional day job to earn a crust because of job losses and wage cuts.
The Revenue’s focus on cash payments is to ensure we do not return to 1980s-style tax evasion, now that the marginal rate of income tax is as high as 54pc for a single person earning as little as €36,400.
Investigates
Asked about tax officials snooping around notice boards to seek details on people who are doing nixers, a spokeswoman for the Revenue Commissioners admitted that it was using a wide range of methods to tackle tax-dodging in the black economy.
“Revenue investigates the shadow economy using all sources of information available, including all advertising sources,” the spokeswoman said. So how do you go about ensuring you are tax compliant if you are earning extra income on the side?
The bad news is that the deadline for making a tax return is approaching. For those who make a paper-based income tax return the deadline is October 31.
If you pay your tax and file online using the ROS (Revenue Online Service) the filing date is extended to November 16 next. For those whose ‘extra’ or non-PAYE income comes above €3,174 in a year, you need to complete Form 11E, according to the Revenue Commissioners and tax adviser Cathal Maxwell of
www.paylesstax.ie.
This Form 11E is a shorter version of Form 11, which is the one filled in by those who are self-assessed like the selfemployed. Making a return is particularly important for those with rental income or those who have made a capital gain and need to pay capital gains tax, he added.
You have a choice of paying all of the tax due for 2008, or 90pc of the tax due for 2009 as a payment on account for 2009. Suppose you decide to pay tax due for 2008. Before you fill out Form 11E you will need to work out a basic income and expenditure account for the tax year 2008 to calculate your profit for 2008.
List all your income for both yourself and your spouse, with separate lines for PAYE income and self-employed income. Other earnings should also be listed such as social welfare benefit payments (such as Jobseekers’ Benefit), rental income, dividend income and deposit income.
These should all be listed separately with one column for yourself and one for your spouse. From this you should list the deductions. These will include medical expenses, pension contributions, losses on rental income and expenses, according to Mr Maxwell.
As a rough guide someone doing the likes of piano lessons can deduct expenses of between 10pc and 15pc from their income to cover the likes of the cost of piano tuning or travelling by car to give lessons. Keep receipts for everything you spend, just in case Revenue asks questions, Mr Maxwell advises.
Work out your tax and include the levies, if you are working out 2009’s tax due. Many people with non-taxed extra income feel it is sufficient to fill out Form 12, which is specifically for the PAYE sector.
But Mr Maxwell warns that Revenue officials have a tendency to pass your file over to the self-assessment section of Revenue if they feel, after scanning Form 12, that your extra income will be earned every year.
“The obligation is on you to file a return,” he said. Levies and surcharges may be imposed if you return Form 12 when you could have made a self-assessment return using either Form 11 or by doing so online using ROS.
However, a Revenue spokesman said this was unlikely in the first year that Form 12 was returned instead of Form 11 or 11E. If it is all too daunting for you you could use the paylesstax.ie online tax advice system or go the traditional route and contact an accountant. But do so soon as tax experts are entering their busy period.
