Tax situation for couple ,1 working,1 now on IB

I

irishpancake

Guest
Hi there

Just looking for some advice.

My wife has had to give up work, due to illness, which is long-term, with no possability of returning to work any time soon.

This has been traumatic, as she has worked all her life, but cannot now resume, until medics give the all-clear.

She is on SW certs presently and getting her weekly IB payment, and will be applying for the Invalidity Pension ASAP.

This was in June, and she was paying tax, etc. up until she left work.

As a result of her changed circumstances, we have not been able to check out our status for taxation purposes.

Our incomes are taxed on the normal Joint Assessment for married couples. The only tax credit she gets is the PAYE Tax Credit.

The full amount of the Personal Credit goes to me.

What we would like to know, is how are our changed circumstances going to impact on our tax situation.

Will she still be treated as a PAYE tax payer, will she still get a PAYE allowance, will the double Personal Allowance be payable, etc??

We would appreciate any advice on this.
 
Sorry to hear about Mrs. Pancake.

Where one is working and the other is on DB you are jointly assessed as a one income family. (Double income means two waged salaries - not strictly "double income"). Basic Tax Credits for wage earner: Marriage Tax Credit, and double P.A.Y.E. Tax Credit. I don't know how Revenue deals with matters prior to June of this year.
 

Thanks justsally, I appreciate that.

So, just to be clear, we will be taxed on my income+her DB(IB), and I will get the paye allowanceX2 and personal allowanceX2??

Mrs. P's DB(IB) will continue to be paid to her in full?

I will contact revenue on Tuesday, to inform of our changed circumstances and to check where we stand regarding tax up to June.

I would appreciate any corrections of the which may apply to my understanding above.

Thanks again for the good wishes, certainly needed now
 
You've got it right - but when Revenue are making our your new "Determination of Tax Credits and Standard Rate Cut-Off Point" your tax credits will be reduced by Mrs. Pancake's DFSA benefit giving you your net Tax credits.
 
justsally said:
You've got it right - but when Revenue are making our your new "Determination of Tax Credits and Standard Rate Cut-Off Point" your tax credits will be reduced by Mrs. Pancake's DFSA benefit giving you your net Tax credits.
Click to expand...

Sorry, this is where I lose the plot altogether, probably because we just did not get into these standard rate cut-off points and tax credits, just paid our taxes every week, and never were in a situation which seems complicated from a tax point of view.

I just don't understand the reduction of my tax credits by the full amount of OH's SW benefit. Can you explain this from a laypersons point of view.

Naturally, I'm talking here about next tax year, 2009.

Just to let you know, I would be on an income of around €54K, and OH was on €34K before this happened, so as you can see there is quite a reduction to absorb.

However, no complaints as long as she gets through the next period and emerges healthy. She will have no other income, no occupational pension, just IB probably going onto Invaidlity Pension ASAP.

But we certainly need to know where we stand from a tax POV.

Thanks again for the help so far,

Mr & Mrs Irish Pancake
 
Sorry I man have confused you further. The tax credits are in fact reduced by 20% of the annual amount of Disability benefit - net tax credits, and the SRCOP is reduced by the full amount of the DB, giving
net SRCOP.

I'm opened to correction so if any poster can help further it would be appreciated.
 
At the end of the current tax year you should obtain a certificate of taxable Illness Benefit from SW and send it together with both P60' to revenue and request a review of taxxes. There may be a refund due.

In 2009 your tax credit certificate should show Married tax credits and PAYE credits x 2.
Credits will be reduced by 20% of the amount of IB payable for 2009 and SRCOP will be reduced accordingly. This is the revenue way of taxing OH's IB

Check carefully the reductionn for IB as the revenue figure does not seem to reflect the correct SW payment. Also remember that the first 6 weeks of IB in each tax year is not taxable

Hope this makes some sense
 
Invalidity Pension is fully taxable. For Illness Benefit the first six weeks in each year is not taxed -see Revenue leaflet 22. Your wife will receive her full payment from D/Social Welfare. As mentioned above tax will be deducted by means of adjustments to your tax credits and SRCOP. I hope this helps.
 
Thanks to justsally, Black Sheep, dubwx for all the advice, much appreciated.

Justsally, I have responded to your most-welcome PM.

Thanks again all, good to have your support and advice
 
Thanks to all the contributors to this thread for the info. My situation is very similar to that of irishpancake & as such all info was relevant. If I could also ask for some additional info/advice, on the same thread, what our entitlements are for claming tax relief on medical expenses that we have incurred, all related to my wifes condition. My circumstances/salary are very similar to the op. I have been told she is not entitled to claim tax relief on these expenses becuase she is in reciept of DB ? Would it make any difference if I claimed for these expenses due to the fact that I ultimately paid for them ?

Thanks again
 
Bassboy

Hope your wife will be well soon. I’ve never heard that someone on disability benefit cannot claim a tax refund on medical expenses.

(1)
Is she on separate assessment? In any event the fist six weeks of disability benefit payments in every year are tax free so Mrs. Bassboy will not have been paying tax on same. No tax paid – no tax refund. Was she below the tax threshold? i.e. irrespective of her income source was she paying tax?.
(2)
If you are jointly assessed for income tax purposes, and you have been paying tax, then you can claim for her medical expenses as well as your own. The annual excess of E250 was removed in 2007, and from 2009 onwards afaik all refund claims will now be payable at the lower rate, 20%.
(3)
A taxpayer can now claim the appropriate medical tax refund for anybody for whom she/he has been paying their medical bills. Naturally receipts must be in the name of the taxpayer.

Hope this helps.
 
Thanks Justsally. That advice is exactly what I was looking for. We had spoken to the Tax office & had sent in all relevant reciepts etc. We are assessed individually but when claiming tax relief, we enclosed both sets of details with cover letter explaining, that me, as the sole earner, had paid the medical bills. Although on reflection, as you point out, these reciepts would have been in the patients name (my wife). After a very long delay & 2 requests for additional information from dept, I eventually rang them & they told me the claim was not valid due to my wife claiming IB. There was no further explanation. I think my next move will be to get reciepts re-issued in my name (I can validate that it was me who paid) & re-submit claim. Again, thanks for your help.
 
To Irish Pancake:
As you are taxed as a married couple your tax credits will remain the same. Your wife will continue to get her PAYE credit as she has income (Illness Ben) taxable under PAYE and you will be entitled to claim relief on any medical expenses you both have.

To Bassboy:
It appears that as you are taxed singly you cannot claim tax relief on you wife's medical expenses. Would you not consider being jointly assessed. It would appear to be a much more efficent way of reducing your tax bill.
If your wife is on IB her income therefore is below the taxable level therefore she has unused tax credits which you could avail of if taxed jointly.
By the way revenue request that you do not send receipts to them
 
Thanks Black Sheep & other contributors. Armed with suggestions & ideas from this thread, I have contacted Tax office & have now switched to joint assessment. This has entitled me to claim relief on medical expenses & also avail of additional tax credits. The person I managed to speak to this time in the office was extremely professional & knowledgeable. She took the time to examine tax payments for the 2.5 years my wife has been unable to work & also fully explained my entitlements. In my numerous conversations with the tax office over the years this was the most helpful person I have ever dealt with. She assumed (correctly in my case) that most people are not too familiar with the ins & outs of various tax allowances & reliefs, so need a little bit of patience in dealing with.

Thanks again everyone. Check in the post in time for Christmas !!
 

Hi Black Sheep.

Thanks indeed for your comments and help, much appreciated. I am in contact with Revenue, and this Tax thing should be sorted out soon.

Again, thanks to all who have gone to the trouble of replying with helpful comments, and PM's.
 
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