DIRT & PRSI on Savings Accounts

wbbs said:
PRSI is an insurance you pay to provide you with benefits, right? So if I get charged prsi on my deposit interest what benefits do I get? Presumably this is not counted as a contribution for the purposes of going toward pension benefits for example assuming I have no other taxable source of income and not getting a prsi contribution any other way.
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That is a good question and I was thinking about it today. I would have presumed the opposite to you i.e. if you pay the social insurance charge on your income you would be entitled to the benefits.

However as a PAYE worker with no investment income (other than deposit interest) and to whom Form 12s, Form 11s etc. are alien, I find this issue confusing.

I would also be interested to see what happens for pre and post 1995 public servants. What rate of PRSI would the pre 95ers pay on their deposit interest, if it is full PRSI could they then become entitled to optical and dental benefit and get a contributory old age pension on top of their public service pension resulting in a combined pension of greater than half their final salary.

If, as speculated by several posters in this thread, PRSI will not be payable on States Savings interest, would a post 1995 public servant be better off with State Savings. They will receive no extra benefits from paying PRSI on deposit interest so they might as well put their savings into a product that is (possibly) PRSI exempt.
 
The more I read the more confused I get. I see a threshold figure of 3174 being mentioned. Let's say someone is a PAYE worker with no consultancy income, rental income, dividends etc.

They do have a deposit account in an Irish bank and the gross deposit interest from it is above that threshold figure. Let's say the gross interest is 7000 and DIRT is deducted automatically from that.

All their savings are in the bank, they have nothing in State Savings.

What does the Budget change? Assuming PRSI is not taken at source, will they have to make a tax return and pay PRSI? Should they have been doing both of the above before now? Or should they have been making a tax return but not paying PRSI?
 
The Ghoul said:
The more I read the more confused I get. I see a threshold figure of 3174 being mentioned. Let's say someone is a PAYE worker with no consultancy income, rental income, dividends etc.

They do have a deposit account in an Irish bank and the gross deposit interest from it is above that threshold figure. Let's say the gross interest is 7000 and DIRT is deducted automatically from that.

All their savings are in the bank, they have nothing in State Savings.

What does the Budget change? Assuming PRSI is not taken at source, will they have to make a tax return and pay PRSI? Should they have been doing both of the above before now? Or should they have been making a tax return but not paying PRSI?
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If their income from non-PAYE sources exceeds 3,174 then they are a chargeable person and should be filing a Form 11 and receiving a tax assessment annually.

If their Form 11 had a PAYE income source on it, then they would not have been liable to pay PRSI on the 7k of Deposit interest.

the change is that in the future they will pay 4% PRSI on that interest. They always should have been, and will continue to be, required to file a Form 11.
 
I never knew that you had to file a return if your only income was for example 4k in deposit interest, I actually would have assumed that you couldn't possibly need to do anything as your income was actually so small and DIRT was being deducted.

As to my question re what benefits accrue to me from paying this pay related social insurance anyone know the answer?
 
wbbs said:
I never knew that you had to file a return if your only income was for example 4k in deposit interest, I actually would have assumed that you couldn't possibly need to do anything as your income was actually so small and DIRT was being deducted.
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Thousands of others would have thought (and still think) the same as you. My understanding always was that you do not have to make a tax return if all your income is taxed at source. PAYE income and deposit interest are taxed at source. Most other forms of income are not taxed at source.

Here is what Grant Thornton's website says about it
[broken link removed]

A person is not required to file a tax return unless he/she falls within the definition of a “chargeable person”. Generally, a chargeable person is someone in receipt of trading or professional income or investment income, i.e. non-Schedule E income. Examples of investment income include rental income, dividends and deposit interest.
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Looks like "someone" with deposit interest has to file a tax return in that case

But then in the next paragraph
An individual in receipt of PAYE income only is a chargeable person if the individual:

- opens a foreign bank account;
- acquires a foreign life policy;
- acquires a material interest in an offshore fund; and
- exercises share options.
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Now if opening a Irish bank account and earning 3174 euro in interest resulted in a PAYE worker having to file a return, why don't they have this in their list.

A similar pattern can be seen on other accountants' websites. Plenty of stuff about dividends, foreign income and some vague mentions of deposit interest - but a lack of definitive statements on the obligations of PAYE workers with deposit interest from Irish banks and no other sources of income. The most definitive statements on this are from mandelbrot on AAM.
 
The Ghoul said:
Now if opening a Irish bank account and earning 3174 euro in interest resulted in a PAYE worker having to file a return, why don't they have this in their list.

A similar pattern can be seen on other accountants' websites. Plenty of stuff about dividends, foreign income and some vague mentions of deposit interest - but a lack of definitive statements on the obligations of PAYE workers with deposit interest from Irish banks and no other sources of income. The most definitive statements on this are from mandelbrot on AAM.
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OK forget Grant Thornton and take it straight from the horse's mouth:

[broken link removed]
Assessable non-PAYE income of €3,174 or more
An individual with assessable non-PAYE income of €3,174 or more for any year is regarded as a "chargeable person" for Self-Assessment and must file a Form 11 for that year.

In Grant Thornton's defence I think you're misreading that last bit you quoted - try putting a comma after "PAYE income only", which indicates that the paragraph specifically excludes anyone with deposit interest.
 
I could read that last piece you quoted from revenue site and it wouldn't tell me in plain english that I had to make a return on the only source of income I had of 4k deposit interest, that might be clear to someone in the business but to the average person I don't think 'assessable non-paye income' would translate to deposit interest from which DIRT was paid.

What hope has the ordinary person of knowing this, I wouldn't even have figured it out and I thought I knew how to fill my tax forms!
 
I don't know what say to ya WBBS, if you drop the word assessable does it make it less confusing - "non-paye income"?! Assessable is just a verb, you get assessed to tax, the income assessed on your return is assessable income... I wouldn't have thought it requires explaining.
 
That's because you know what it means, this is language familiar to you in your business I imagine. I understand it of course, I just don't think it is that clear to the average person that your taxed deposit interest is part of it.
 
How can it not be?
If I asked you "is deposit interest a form of income?" what would you say?
And I'm pretty sure everyone in the country knows what PAYE income is.
So I'm not sure how much clearer it couldbe, short of listing it. But if you start listing things, that's when the clever slippery fellows start trying to figure out what's not listed, or how to get around what's listed.

Anyway, what I quoted was from the tax briefing, aimed at tax professionals - is either of these sources more comprehensible to the layperson?:

http://www.revenue.ie/en/business/self-assessment.html
Self-Assessment gives you greater control and responsibility over your tax affairs. It applies for Income Tax purposes to:
Self-employed people (i.e. people carrying on their own business including farming, professions or vocations)
People receiving income from sources where some or all of the tax cannot be collected under the PAYE system, for example: profits from rents, investment income, foreign income and foreign pensions, maintenance payments to separated persons, fees, profit arising on exercising various Share Options/Share Incentives.

http://www.revenue.ie/en/tax/it/leaflets/it10.html#section1
Persons receiving income from sources where some or all of the tax cannot be collected under the PAYE system, for example:
profits from rents,
investment income,
foreign income and foreign pensions,
maintenance payments made to separated persons or where civil partnerships are dissolved,
fees and other income not subject to the PAYE system,
profit arising on exercising various Share Options/Share Incentives.
 
Mandelbrot,

What then has changed with respect to deposit interest with the 2013 budget?

Why was it announced that self employed would have to pay PRSI on deposit interest from 1/1/13 and people in the PAYE system have to pay from 1/1/14 if that was always the case? (I'm not disputing that it was the case)

Is the change that it's going to be deducted at source to combat the deliberate and accidental non-compliance?
 
So the prsi is going to be taking at source , would that not mean every one will move to anpost , also i bet dirt goes to 35 percent in the next budget that would mean 39 percent taking at source
 
So, if I earn Deposit Interest at the moment which is less than €3,174 and do not earn any other income at all then I do not have to file either a Form 11 or Form 12 as DIRT covers the tax element of the Deposit Interest - is that correct ?

And if in 2014 I still earn less than €3,174 Deposit Interest and am still not earning anything else and I have read that the PRSI Threshold is €5,000 and I don't pay PRSI for anything under that then what happens ?

And what happens to our Joint Savings as my husband is a PAYE worker ?
 
The Sunday Business Post asked the Revenue if PRSI would be deduced at source from the deposit accounts or via tax returns. The Revenue replied that they has not made their mind up on the implementation yet.
 
At source would be the only logical option and hopefully most state savings products will escape this.
 
It may seem strange but if nobody puts money into banks then ,amazingly, banks won't be able to lend. Equally, if people take out all their money out of banks ..then no banks.

It would seem folly for state savings to be treated differently from bank savings.
 
Im self-employed and paid PRSI on my deposit interest for 2011. Why are they saying it is to be implemented from 01/01/2013?
 
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