tax credit question please?

A

Allegra

Registered User
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31
Hi

My friend recently gave up her lone parents allowance and with that, her one parent family tax credit. She earns about 280 per week at work, was getting 154.00 per week on lone parents her tax credits were as follows

Single Person 1650
paye 1650
opf credit 1650
total 4950
This was reduced by One parent family allowance 8000 per yr @ 20%= 1600
New total: 3350

So now shes signed off lone parents, and given back her tax credit for one parent family and her new tax credit certificate shows a SRCOP of 24,484 and Tax Credits of 1700.

She only gave up the one parent tax credit on Dec 1st as she moved in with her partner that week...so her tax credit is being removed for the full year of 2011....and shes still getting a reduction for claiming opfa for the full year? She hasnt rang them yet, I said id post here to see what you guys say first.

She works for a very small company, just herself and one other and she gets a net wage regardless of her taxes but her boss isnt happy its showing up as she owes him 1153.00!!
 

That's terrible, and unfortunately, by the letter of the legislation she wouldn't be entitled to the tax credit for any part of the year. The legislation says that the relief (i.e. the one parent family tax credit) does not apply "in any year of assessment... in the case of a man and woman living together as man and wife", so you only have to live with a partner for any part of a tax year to invalidate your entitlement to the credit. This is a classic example of someone getting screwed by the system for doing things right, when half the country probably get away with it...

I understand that what would normally happen in that situation is that the tax office would send out a "Week 1 / Month 1" tax credit cert to the employer up to the end of the year, so as not to give rise to the type of underpayment situation you describe. Then, if/when a review is carried out, an underpayment can be collected by way of adjusting the tax credits for subsequent year(s).

In this case your friend isn't caught, directly at least, as you say she has a net pay arrangement with her employer and they've continued to pay her up to the year end, but I imagine they may try to get it back from her somehow or other...
 
yeah its a classic case of double standards in the revenues favour! Take her tax credit for the year, but still charge her the reduction for receiving what she was entitled to!!

Thanks for that, its what I was thinking. Operate w1/m1 until the end of the year and let them recalculate next years tax credits to collect the underpayment. Ill get her to ring them tomorrow.....but of course she cant get through because of this whole cock-up with the pension fiasco!
 
Allegra said:
Hi

her new tax credit certificate shows a SRCOP of 24,484 and Tax Credits of 1700.
Click to expand...

Revenue have taken off the one parent tax credit but not the social welfare payment. At the moment her new tax credit cert is:-
paye credit 1650 +
personal credit 1650 =
3300 less 1600 (social welfare 8,000 @ 20%) = 1700.

Give them a ring and let them know she is not in receipt of social welfare this year. Her tax credits will increase to 3300.

Her employer cannot give her a "net wage regardless of her taxes"!! If she now pays less tax because her tax credits increase well then her net pay increases. Sounds like he's not operating the PAYE system correctly or he's paying her cash in hand. Does she get regular payslips and a p60 at end of year?

She is still entitled to the one parent tax credit for 2011 as she was a single parent for part of the year. If she told Revenue that she moved in with boyfriend in December they should not have taken the credit off. She should request a p21 balancing statement for 2011 which will show if she still has the one parent tax credit for 2011. she will need to send in her p60 though so hope she can get one from her employer.

from rev website:-

Who can Claim?

An Individual (whether widowed, single, divorced, deserted, separated) who has a dependent child resident with him/her overnight for all or part of the tax year.
 

No, afraid not, as I've already quoted above, S.462 TCA 97 states that the relief doesn't apply "in any year of assessment... in the case of a man and woman living together as man and wife". The part you've quoted is not in question - it simply ceases to be relevant once the taxpayer moves in with a partner. The fact that the tax credit was removed for the whole of the year (as the OP has confirmed it was) is consistent with this.

It's a bit unfair, but from an administrative point of view you can see why it was done this way. The alternative would be that people would be entitled to the credit (or a time apportionment of the credit) for any year where they were a single parent at any time in the year. Then you'd have claims coming in all over the place, saying "I was a single parent for 2 months" etc... all very messy. So the consequence is a clear rule that can unfortunately be quite punitive to some.

ironman said:
She should request a p21 balancing statement for 2011 which will show if she still has the one parent tax credit for 2011. she will need to send in her p60 though so hope she can get one from her employer.
Click to expand...

The OP has stated that this person did receive an amended tax credit cert for 2011, this is what has given rise to this 1,153 liability - as the employer continued to pay the standard 280 per week net to the employee, when they should have been paying Zero if they were going by the cert (assuming it was a cumulative cert).

No doubt the person will get a P60 from their employer - it is quite common in smaller businesses for employers to (foolishly) pay the employee an agreed net amount, and gross up afterwards for the tax / PRSI / USC. Dangerous, as this situation illustrates! And likely to be a serious issue if the NERA people call around too!
 
Copied from Rev website - Staff Instruction [15.1.18] One-parent family tax credit
Section 462 Taxes Consolidation Act, 1997
Late updated October 2007
Reference Material: IT 9
1. Introduction
Section 462 TCA 1997 [formerly Sec 138A ITA 1967] provides for an additional tax credit for widowed parents and other single parents.
The credit is given where a person has a "qualifying child" resident with him or her for the whole or part of the year of assessment and the other conditions of the relief are satisfied as well.
2. Conditions for the tax credit
To qualify for the one-parent family tax credit
(1) An individual must be -
(a) unmarried, or
(b) a widow or widower, or
(c) a married person who is living apart from his/her spouse and who is not entitled to the married person’s allowance,
and
(2) The “qualifying child” must be resident with him or her for the whole or part of the year of assessment.

The tax credit is not due in the case of a husband or a wife where the wife is living with her husband, or in the case of a man and woman who are living together as man and wife.

Where an individual satisfies the conditions at (1) for part only of the year (e.g. a wife separated from her husband during the year of assessment), a full tax credit is due provided the conditions at (2) are also satisfied during that part of the year.".

To put it into context in this particular case the section in bold would also apply where an individual satisifies the conditions for part of the year e.g. a person moving in with his/her partner during the year of assessment. as per above they are due the FULL tax credit.
 
Thanks Ironman, good work, it looks like I was wrong (first time for everything... ), although I would still maintain that based on the wording of the Section in the Act, Revenue would be entitled to adopt the alternative interpretation. Thankfully it appears they haven't.

Based on that, the One Parent Family credit shouldn't have been withdrawn from the OP's friend for 2011, but they don't qualify for 2012.

So OP, your friend should contact her tax office and refer them to instruction 15.1.18, and ask them to reinstate the credit for 2011.

This won't strictly speaking solve the problem for the employer though, as he won't be able to be reissued with a tax credit cert for 2011 after the year end. So, if he does declare and pay over the 1,153 in tax, the employee would be able to obtain a repayment of it... of course, what she does with the repayment after she gets it would be her own business.
 
So, my friend rang Revenue and explained the situation. She didnt even have to go as far as quoting Staff Instruction [15.1.18] One-parent family tax credit and they said they had made the error and they would re-instate the Tax Credit for the full year of 2011 and remove it for 2012. They told her to tell her employer to disregard the new tax credit cert and work ahead with the older cert showing the corrrect information and they would amend it on their side. They were very helpful.

Many Thanks again guys.
 
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