HOW CAN I STOP MY BANK UNFAIRLY RUINING MY CREDIT RATING?
TA writes from Co Mayo: I work as an office manager and my husband is a self-employed contractor whose company showed a loss of just under €2,500 last. We are both in our 30s and have two young children. He also works on his father’s farm part-time but together we take home about €2,300. We have 10 years remaining on a 20 year mortgage with Bank of Ireland and are now on a variable rate of 4.5% after coming off a slightly lower fixed rate. The repayments are in the region of €895 a month.
We approached the bank for a five year extension to our mortgage. We completed a Standard Financial Statement and it showed that our outgoings are nearly €3,000. The bank refused and instead offered us an 18 month repayment of €654. Our issue is that their offer states “The Lender may record the alternative payment arrangement set out in this form with the Irish Credit Bureau (ICB).” We have never been in arrears and I am not happy with this because I am afraid our credit rating could be affected. Any advice would be welcome.
The insolvency and bankruptcy expert, Paul Carroll of Neo Financial (www.neofinancial.ie) told me that your request to extend the term of your mortgage “is not unreasonable” in light of the difficulties that small business contractors have experienced in recent years. A note from the bank to the ICB about this forbearance offer, said Carroll is not as serious as one that notes a customer has missed mortgage payments “but it would alert other lenders that your readers have had difficulty paying their loan.” The effect could be the same – you could be refused new credit, or the interest you are charged could be higher.
According to Carroll, you could try and call the bank’s bluff by telling them that you will consider applying to join the ‘pre-arrears’ Mortgage Arrears Resolution Process (MARP) if you believe you are at risk of going into arrears in the future and so need some forbearance. (See http://www.keepingyourhome.ie/mortgage_arrears_resolution.html ) They may prefer not to have you join that long list of customers.
If it comes to that, once in MARP, you can try to formally negotiate what you believe is a more sustainable solution with the bank, says Carroll. You must still try to keep paying your mortgage to the best of your ability and communicate in writing with the bank, keep all email messages and log all telephone calls. You might also want to contact your local MABS office for advice, or seek the help of financial adviser who may be able to intervene with the bank on your behalf. Unfortunately, the bank may still report - a more favourable - forbearance measure to the ICB.
Good luck.
WILL I HAVE TO PAY US AND IRISH TAX ON MY AMERICAN PENSIONS?
EC writes from Dublin: I worked legally in the US for 14 years as a member of a construction union and for the required 10 years to receive a pension. I receive a statement every year here in Ireland from the union stating my entitlement. I also have an annuity fund that I also receive a statement for. As I am not an American citizen, will that affect my payments in any way when I look for them? My wife and kids are all American citizens and we have lived outside the US for 12 years now. I have no legal status there anymore.
Since you are a tax resident here (and, I presume domiciled here, which is usually based on where you/your father were born and where you consider your home) if you revert your US pension income back to Ireland it will be subject to Irish income tax. Normally, foreign private or occupational pensions are paid gross to Irish resident recipients. (Government pensions are usually taxed in the original country.) If for some reason your US pension was already taxed before you received it, under the double tax treaty with the US, you would be able to claim a tax credit here for any US tax you pay.
Irish pensioner couples today are not liable to income tax if their annual joint income does not exceed €36,000, so assuming this rule still applies when you retire, you may not be liable to any Irish income tax if your joint income does not exceed the tax-free threshold that year. However, if your US pensions are taxed before your receive them, you will not be able to claim any Irish tax credit as you will have paid no tax here.
You should contact your old union, or an accountant or financial adviser who is familiar with the way in which private pensions are taxed in the US for a definitive answer. Finally, the adviser can also double check to ensure that your wife and any adult children are tax compliant with the IRS. The 2010 FATCA legislation (regarding the tax position of foreign assets) means that Irish banks have an obligation to report the names of American customers to the US tax authorities.
MY SON ISN’T SURE IF HE SHOULD STILL BE PAYING TAX HERE
EO’B writes from Dublin: My son is working for a financial institution in the UK since 2010. He has his property here rented out and has paid property tax and he also paid tax on the rental income. My question is, should the rental income be taxed as he is no longer resident here for tax purposes?
Since your son owns an Irish property, despite living in the UK and being tax resident there, he is still liable to pay Irish income tax on his rental income. If he remits the income he earns from his Irish property to the UK, he is also obliged to file a UK income tax return. However, the double taxation treaty between Ireland and the UK means that he should be able to claim a tax credit in the UK for his Irish income tax payment. He should speak a good tax adviser (or a company like Taxback.com) to make sure he hasn’t been paying tax twice or to help him seek a refund if he has overpaid.
Do you have a personal finance question that needs answering? Write to me @ jill@jillkerby.ie