Everything taxpayers need to know about the new Form 12

This June, the Revenue Commissioners will write to about 40,000 taxpayers requesting them to complete a Form 12 declaring any other income they may have earned outside of the PAYE system.

For many, it will be the first time they have faced such a prospect, and for those unfamiliar with the system it can be a daunting experience. Typically, if you pay your tax in the PAYE system, the only bit of tax "housekeeping" you might be obliged to do is check your P60 and your statement on tax credits. Now, efforts to ensure all taxable income is being accounted for will mean that an increasing number of people will be required to file income tax returns.

"It's part of a drive by the Revenue to get more people in the PAYE sector to complete forms where they have other non-PAYE income," says Cathal Maxwell of paylesstax.ie, noting that, previously, the rules on when non-PAYE income had to be declared were not uniformly employed.

If you are one of those with non-PAYE income expecting a letter from the Revenue – or feel that you should be filing such a return – it may be time to familiarise yourself with the process.

And, if you are going to have to pay PRSI on your savings thanks to a change in last October’s budget, how will you do so?

What is a Form 12?

This new online tax form is for people whose main form of income is through the PAYE system – a job or a pension, or a nonproprietary company director who pays all their income through the PAYE system.

Simpler than the paper version, it will include certain important information from your Revenue record to help you complete your return, and you need only complete the sections of the form that are relevant to you.

Who should be filing one?

If you are a pensioner and in receipt of income which, when combined with your state pension, pushes you into the tax net, you will have to file a Form 12 if you are not already being taxed on that income (it will be shown in your tax credit certificate if you are).

If you wish to settle tax on non-PAYE income – such as rental income or income from savings – where the assessable amount is less than €3,174, you will have to file a Form 12. Remember, below this limit you won’t have to pay PRSI, and if this income is generated from regular savings or investments, DIRT tax will be deducted at source.

Thirdly, if you wish to claim certain tax credits – such as health expenses for example – you can do so by filing a Form 12.

How can I file the digital form?

If you are already registered with the Revenue’s PAYE Anytime service, you can complete the eform by clicking on the “eForm 12” link on revenue.ie and using your Anytime pin number. If you are not registered for Anytime, you can do so on the website. You will receive your pin in the post, and this can be used to access the eform.

"Another option people have is to file a very simple form Form 12 S, which is just a four or five page form," says Tony Kirwan of professional services firm Gannon Kirwan Somerville.

Indeed, the Revenue says this is sufficient if it covers everything you need to return or claim. However it also suggests that as the eForm 12 has been prepopulated with all the data the Revenue has on efile for you, it is the “easiest and quickest” way of completing the form.

To file the digital form you will need the following information:

Your PPS number;

Your P60 for the year ended December 31st, 2013;

If you are jointly assessed, your spouse or civil partner’s P60 for the same period

I’m a pensioner – should I be filing a Form 12?

If your only income is your State pension, then a Form 12 won’t be of concern to you. “The State pension is taxable, but if it’s your only income, generally you’ll be under the limit and won’t really have to file,” says Kirwan.

If however, you have a private pension which supplements your State pension, then you might find that you need to pay a certain amount of tax on it. The exemption figures to remember if you are 65 or over is €18,000 for people who are single, widowed or a surviving civil partner and €36,000 for a married couple or those in a civil partnership.

A way around having to file a tax return is to simply get your tax credits adjusted so that any tax you owe on your State pension is deducted from your occupational pension payments.

Can I claim tax credits through the form?

You can claim a range of tax credits, allowances and reliefs through the form. These are: flat rate expenses; health expenses; home carers tax credit; foreign dividends; medical insurance relief; nursing home expenses; one-parent-family tax credit; and owner occupier relief.

Since 2012, relief on bin charges has been abolished. You will need to keep any relevant receipts for six years (so if you have private medical insurance, for example, ensure receipts are sent back to you after you make a claim), but you won’t have to send them to the Revenue.

The time limit on claims for repayment of tax is four years.

Should I do it now or wait until the deadline?

The same deadline applies for Form 12 as for Form 11, which is typically filed by those who receive self-employed income, ie October 31st, 2014 for the 2013 tax year. So, you will have to file a return for income earned in 2013 by the 2014 deadline.

The Revenue is currently piloting its eForm 12 online, which, it says, covers 90 per cent of taxpayers as it will deal with the standard income sources and credits. A more detailed eForm 12 will be launched on June 30th, which will include all allowances, reliefs and tax credits not currently catered for. So, if you think you will need the full version of the form, it might be best to wait.

Bear in mind that the eForm 12 does not provide for the return of capital gains tax. So, if you have disposed of any chargeable assets, you will need to complete a separate return for capital gains tax and submit it to your Revenue office.

What do I do if my non-PAYE income is greater than the threshold mentioned?

If you are not self-employed but typically earn more than €3,174 outside of the PAYE system – for example if you have a rental property – then it’s likely that you will be used to filing a Form 11 tax return.

If you have substantial savings which earn you an income in excess of this figure, then you may find that you will also have to file a tax return to declare this income.

Indeed if you owe tax of €3,174 or more on non-PAYE income, (ie savings, dividends, rental income) then you will be subject to self-assessment as a so-called “chargeable person”, and you must file a Form 11 – not Form 12 – for that year. This is the same form that a self-employed person or someone with rental properties files and is therefore more comprehensive.

But should I be filing one?

Previously, if you had savings of, for example, €100,000 earning an interest rate of 4 per cent, your tax would have been deducted at source via DIRT. As of last October’s Budget, you must now also pay PRSI on this – as self-employed people did previously – at a rate of 4 per cent, and you will have to file a Form 11 tax return to declare this income.

While this process is fairly straightforward if the majority of your income comes through the PAYE system, it may make sense to get some advice first time around (see panel).

Remember, if you’re over 66 you are exempt from PRSI – but according to the Revenue you will still have to file a tax return to declare this income nonetheless.

How much for tax advice?

If you’re feeling a overwhelmed as to how you might get your tax affairs in order, it might be worthwhile paying for some advice.

Getting your tax affairs looked at by an accountant will typically cost from upwards of about €250, plus VAT, says Tony Kirwan of professional services firm Gannon Kirwan Somerville.

Another option is to outsource it to an online provider. Taxback. com, for example, charges a flat fee starting at €199 for filing tax returns, and it promises to offer you a quote before you agree for it to proceed with your return. It also offers a PAYE refund service which will cost you 10 per cent of the refund, plus a handling fee. The company says the average PAYE refund is €880.

Paylesstax.ie offers tax-refund packages from €149, which include phone support. It also offers a “check and file” service for an additional €90. This means that your completed tax return will be checked by a tax consultant and submitted to Revenue on your behalf.