Tax on severance agreement payment

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Navanman60

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Hi...I received a payment from my last employer of €33000 in December 2023 as a severance agreement settlement. This wasn't a redundancy payment but what was a termination payment as part of a compromise agreement. I worked with them for over 7 years. I paid almost €17000 in tax, prsi and usc on this payment so I contacted the tax office via my online Myaccount and they said that as it was paid in December 2023 and I used up my tax credits for the year it was correctly taxed at 40%. Is there any way I can claim back some of the tax paid on this lump sum or is it not possible due to the fact that it wasn't classed as a redundancy payment ?
 
I have a similiar scenario to the above but a different query. The ex employer treated the payment as taxable. The Revenue have quite detailed guidelines and examples on this - my interpretation of them is that the payment should not have had tax deducted. My query here is not whether it is taxable or not - rather how do I proceed and get this queried with Revenue? Do I have to wait till the end of year tax return or what other mechanism is available?
 
Not a tax expert but based on my experience it sounds correct.
Any income over 70k has effective tax rate of 52%. The only thing I know to do to ease the pain is make AVCs into pension and get some tax back that way. Not much good if you need the money now though. It hurts for sure.
 
It sounds as if the entire amount of the severnace payment has been taxed and this, most likely, was not correct. You will need to show that it was a severance payment to the Revenue and the payment will need to be recatagorised. Do you have a copy of the signed severance agreement showing the payment was for severance of service. This will need to be sent to the Revenue to demonstrate that it was a severance agreement and not earnings from your employment. It often occurs that the final payment includes accrued holiday leave, a bonus (perhaps) and the December 2023 salary payment. Each of these is taxed as normal but the severance payment is not. There are methods of calculating the tax free lump sum payable on cessation of employment - look at these on the Revenue website and see which one applies to you. There is the basic exemption, the increased exemption and the standard capital superannuation benefit - each has different rules. You are entitled to take the highest amount of each option and this is your tax free amount. You should be well within time limits as the four year rule won't kick in until 2027 or so. Best of luck.
 
Thanks for the replies - in my scenario - the payment was made in 2025. The amount has already been taxed by the employer - apologies if this is a basic question (I am not familiar with this) but how does one get the Revenue to look at this. Is there an online query mechanism or phone call?
 
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