Are you a Single Parent?

Not the most complicated question I hear you say - most of us instinctively know the answer to this question and feel it true for our own situation. 

But the Revenue Commissioners take a more definite view on this. 

In Tax Terms, being a Single Parent can be of great benefit and can be worth more that €2,700 in Tax Refunds for a single year.  But If you claim it incorrectly, then Revenue can review your taxes going back 6 Years – and you could easily be stuck with a Tax bill of over  €10,000.

How to qualify as a Single Parent?

The two primary considerations to be deemed a Single Parent by Revenue are:

• You have a Child under the age of 18 who is ‘dependent on you’ – not as onerous a test of eligibility as you might think this one, you will be eligible if your child resides with you overnight from time to time.
• You are not living with a partner as ‘Man and Wife’, whether married or not.  This is how Revenue express it and where most people come unstuck and make mistakes.

Where is it going wrong?

There can be a misunderstanding as to what constitutes living together as Man and Wife  – and it really is the wrong term as people understand it in this day and age.

Take the example of Seamus and Debbie who get together, have baby Johnny and get a mortgage together.  Certainly not single parents.  A year later, Seamus and Mary break up and Mary stays in the house while Seamus moves back home and minds baby Johnny at the weekend.  Are they single parents now?  Well, yes you’d think, of course they are.  So both Mary and Seamus apply for the Single Parent Tax Credit and receive it.

So what goes wrong in this case?  Quite a few things really.

Mortgage Interest Relief

Mortgage Interest Relief is granted on the interest paid on your principle private residence.  i.e. where you live.  Seamus and Mary are still in touch and Seamus contributes to the mortgage payment as he had when they were together.  But he is receiving mortgage interest relief on the loan when he shouldn’t be – as it is not his ‘principal private residence’.

The Revenue Clampdown

This is from observation rather than any Revenue communication on the subject, but Revenue have been targetting incorrect Single Parent claims since the start of this year.   How?  They are looking at Single Parent Tax Credit claimants who also receive Mortgage Interest Relief on a joint mortgage.  In terms of arguing your corner with Revenue, you really are stuck  in a catch 22 here as:

• To get Mortgage interest relief you have to be living in the house
• In order to get Single Parent Tax Credits, you should not be living there.

So you are going to get caught for either the Mortgage Interest Relief or for the Single Parent Tax Credit and have to pay back a hefty sum.

We have spoken to a number of people this year who came to us to help them with their tax assessments which show them owing sums of up to €14,000, so situations similar to the one above are happening across the country today.

Fixing the Single Parent Tax Problem

The above situation illustrates how complicated individual taxation can be and how easy it is for expensive mistakes to be made.  We normally talk about the Expensive mistakes and ommission that when  ‘righted’ can be worth significant Tax Refunds.  But we also feel a duty of care to ensure that our clients taxes are left in good nick and this shows how not having someone professional check your taxes can cost you a lot of money and stress.

With the granting of Single Parent Tax Credits so much based on your personal situation – breaking up, moving back in, meeting someone else, moving home etc – We think it’s completely inappropriate that this Credit  is carried forward in your tax credits from year to year without question.  Either Revenue should oblige that you reapply for this tax credit each year, or inform you of your obligation each year to inform them if your personal situation has changed. 

This will help ensure that Revenue can spend more catch those who are trying to fraud the system in this way, rather than having to reclaim tax from those who made an honest mistake.

Further Information:

• Check out our other blog posts relating to Single Parents
• See what Tax Credits are available to you
• Get a Complete Tax Refund Review now
• Get a Tax Refund Estimate