What are, the Income-tax and PRSI differences associated with being self-employed or an employee?

Assignment Brief

One of your clients purchased a number of residential properties for investment which he plans to rent out immediately.

Draft a letter to your client setting out in detail the Income Tax implications of renting residential properties with reference to The basis of assessment, all allowable deductions, capital allowances, and rental losses.

1) List and explain six factors that would be considered when trying to determine if an individual is an employee or self-employed.

2) What are, the Income-tax and PRSI differences associated with being self-employed or an employee?

3) List 8 benefits an employee can receive tax-free. For each benefit explain the circumstances necessary to qualify as tax-free.

Dave and Paula are a married couple with 3 school-going children. Dave works as an IT Manager with a large Consultancy firm in Dublin City. His salary for 2022 is €130,000 with €25,000 PAYE withheld. Dave is 46 years old and contributes €2,500 each month to a Revenue-approved pension fund.

He received €900 (Net) dividends from an Irish Co. and Dirt of €1,675 (Net). His company-provided car cost €30,000 OMV €42,000. His total travel was 38,000 km for the year of which 12,000 km was for personal use.

Paula retired from her position as a hair stylist to devote her time to their three children. She now only works part-time every Saturday in her sister’s hair salon earning €5,500 in 2022.

Their family medical expenses in 2022 were €2,860.

Doctors €420, Glasses €300, Dentist (Routine) €460, Prescriptions €480 and Consultants €1,200. Their health care provider paid €460 of the costs.

Prepare Dave and Paula’s 2022 income tax computation (30 Marks)

Presentation and Referencing