Taxed too much for years

Motherof3

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Hi. I am off work sick for 8 years and receive invalidity pension. My employer has an income protection policy for me and I'm supposed to receive:
'' 75% percent of my gross salary, less any statutory benefits''

This is how they tax me....
''The 75 percent gross pay is subject to statutory PAYE, USC, and Prsi deductions, and then the invalidity amount is deducted from the net pay. ''

So as a rough guide, if my monthly gross pay is 2000, my net pay is between 300 and 500 a month.

My tax credits are reduced by my invalidity payment total already. So the above tax procedure also means I get taxed on my invalidity payment again. I receive the invalidity directly into my bank account.

My P21 is also incorrect each year. The details of my gross pay sent from my employer to the tax office also includes my annual invalidity pay total. So it looks like I earn an extra 10k a year.

In 2016 I claimed back tax for the previous 3 years. I have now been trying to claim tax back for 2016, 2017 and 2018 since last June. I am having a terrible time with the tax office who keep on saying that my employer is taxing me correctly.

Any advise would be greatly appreciated .
Thank you
 
As I read above I understand that you receive 75% protection but is less the amount of social welfare you get - nothing to do with tax. Regarding tax revenue reduce your tax credit so that the amount of social welfare you receive is taxed by your employer so that you won't owe a big amount at year end.
If your employer is adding your social welfare to your gross pay then that is not correct. If our tax credit was not reduced then your employer could add the two together and apply the normal tax credit.
 
Hi. Thank you for your reply and I agree with what you said. The tax office won't even look into this anymore and I don't know where to turn to. I am chasing the tax office since last June and it's really taking it's toll on me. The following is the last reply I received from the tax office, which is completely incorrect....



''I note from the payslips you provided that your social welfare invalidity payment is appearing as a deduction.
According to your employers when you are in receipt of permanent health insurance the final pay figure for qualifying employees who are on long term sick leave is calculated by taking 75% of your gross salary and deducting any statutory benefits received by you.

Tax is calculated on your PHI plus any benefits and this tax deducted from the gross pay figure along with PRSI and USC. Statutory benefit is then deducted from net pay after tax. Therefore your invalidity benefit is not being taxed by your employer as they are following their procedures as outlined above.

As confirmed by you the invalidity benefit is paid directly into your bank account.

This invalidity benefit is taxable and the tax is collected by reducing your credits and rate band during the year.

As a result you have been taxed correctly during the year and no refund is due for any previous years.''

When I call the tax office they won't let me speak to a manager and tell me that the matter had been dealt with.

Is there anything else I can do?
 
Hi Motherof3,

It would appear that your payslip shows 75% of your salary and your invalidity pension appears as a deduction.

This is not income tax, but rather the reduction of your salary @ 75% by statutory benefits, i.e., your invalidity pension.
 
Hi. But, should my employer be taxing the 75%?
Should my employer take the 75% and deduct the invalidity pension amount first, and then calculate the tax on the balance?

Hope that makes sense
 
Without seeing your payslip or P21, I'm not sure that they are.

Could you post your final payslip figures & p21 figures?
 
We would need to see payslip - I think you may be confused between the statutory deduction and the actual benefit you get which goes directly to your bank.
 
Hi. I have seen 3 explanations in print, explaining how my tax should be calculated.

1 "a monthly benefit of 75 per cent of your basic annual salary is paid to your employer and then paid to you through payroll with the usual tax and national insurance/social security deductions"

2."basic benefit, an annual amount equal to
A, 75 per cent of scheme salary
Less
B, the 'state scheme deduction'

3. 75 per cent of gross basic salary(excluding all cash benefits)

A work colleague in the same position as me showed me his payslips and he is taxed differently than me, but I do not want to get him involved.

So, before I went on sick leave I received approx. 550 euro net a week.

My P60 ending 2016
Tax credit 1,378
USC band 1: 12,012
USC band 2: 18,668
(A1) Total pay: 27,410.04
(B1) Total net tax deducted : 4,103.92
Total and net USC deducted : 800.61
Gross pay for employee PRSI purposes: 27,410.04
Employees PRSI: 1,096.32
Employer and employee PRSI: 4,042.82
Number of weeks: 53
Contribution class : A1



P21 FOR TAX YEAR 2016
Employment income: 27,410.04
Invalidity pension : 11,801.50
(The invalidity pension amount is already included in the 27k!!)
Personal tax credit: zero
PAYE tax credit: 1650.00
Medical insurance relief: 400.00

FINAL PAY SLIP OF 2016 IN DECEMBER

FIXED AND VARIABLE PAYMENTS
PHI : 1,921.81
BIK Healthcare: 362.36
Notional pay 362.36


STATUTORY &VOLUNTARY DEDUCTIONS
Value Balance
Tax: 341.99 4,103.93
PRSI . 91.36 . 1,096.32
USC. 66.72 . 800.62
Welfare 893.20 0.00

CUMULATIVE DETAILS
this period. Year to date
Gross pay: 1,921.81 23,061.72
Taxable 2,284.17 27,410.04
STD.cut of point . 30,700.08
Tax credit . 1,378.08
Tax paid . 341.99 4,103.92
Employer PRSI .245.54 . 2,946.48


NO MISCELLANEOUS ITEMS

PAYROLL SUMMARY DETAILS
gross pay . 1,921.81
Total deducts. 1,393.27
Nett pay. 528.54
Total pay . 528,54 (some months Total pay is only 300 euro)

Please also remember that the tax office sent me tax refunds of approx. 3000.00 euro per year for 2013, 2014, and 2015. But I really had to fight the tax office to convince them to refund me. Now I am looking for refunds for 2016, 2017 and 2018 since last June.i don't know what else to do.

Thank you everyone who takes the time to read this. I really appreciate it.
 
Hi Motherof3

Per your details, your final payslip shows:

PHI : 1,921.81 + BIK Healthcare: 362.36, which combined would equal 27,410.04 annually.

I note that USC and PRSI have been applied to the full amount of that payment.

Invalidity Pensions are not subject to either USC or PRSI.

Are you certain that your Invalidity Pension is included in the 27,410.04 as stated above.

Have you confirmed with your employer that it is?
 
My employer keep on insisting that my invalidity pension is not included in their P35 or my P60.
My basic salary is approx. 28,000.00 EURO per year plus health insurance which costs about 5,000 euro per year.
My P60 each year states that I'm earning approx. 39,000 euro a year while off sick. How can that be correct? The tax office did tell me before that invalidity pension has nothing to do with an employer (because they reduce my tax credits) so it should not be included in the payroll.

I think they should do the following :
75% of my wage, minus invalidity pension, and tax the balance.

But this is what my employer does:
The tax the equivalent of 75% of my wage, and then take the invalidity pension amount from the net. Therefore they are including my invalidity payment in the tax calculations, and my annual salary total. I think they should be deducting my invalidity pension from the 27,000 and entering the amount in section A3 or A4 of the p60 which is for illness payments.

Hope that makes sense . Thank you
 
You stated that your net salary per week was 550per week, i.e., 2,800 per annum. What was your gross salary?

Does the PHI take account of pay increases?
 
Annual salary before sickness was approx. 28,000 per annum plus approx 5,000 per annum paid for healthcare. I have never been informed in writing or by email of any pay increases.
 
Annual salary before sickness was approx. 28,000 per annum plus approx 5,000 per annum paid for healthcare.

Yes, but as you previously stated that was your net pay 8 years ago.

I really think you need to clarify matters with your employer first before pursuing your claim with Revenue.

Find out what your gross pay plus benefits-in-kind would have been in 2016 and later years before deduction of the invalidity pension.
 
I have never advised this before. But go with Taxback or one of these other providers, and let them chase the refund for one year - the oldest year only. (You probably need a tax-agent to assist here, and to write a good letter .. or to give you the proper concise arguments for your employer, because something isn't working here somewhere)

Taxback will take c30% of the refund - hence asking them to do the oldest year(2016?) only. If that is successful, you should be able to use their successful arguments for yourself. Taxback won't charge if no refund due#

#check their T&Cs first!
 
As far as I can see your employer is paying you the 75% deducting tax etc, and deducting an amount equivalent to your social welfare , described as statutory entitlement which is what the income protection scheme allows. You get invalidity pension separately which is taxed by reducing your tax credit. So to put it another way they are not deducting your actual invalidity pension but an amount equal to it as per the terms of the protection plan. You should ask someone in the company to explain the protection scheme to you. I don’t understand how you get different amounts every month from your employer.
 
I think the OP's point is that the Gross Pay on the P60 includes the invalidity pension to which the employer is applying income tax, USC and PRSI.

In other words that the PHI payment should be 15,608.54 i.e., 27,410.04 - Invalidity Pension 11,801.50.

Therefore the point at issue is whether that is actually the case.

If 15,608 were 75% of gross pay, then the gross pay would only be a little over 20,811 per annum.

Based on the details provided of pay in 2011,when she went on sick leave, i.e., 28,000 net of income tax, USC and PRSI, I am inclined to think that the P60 Gross Pay figure, 27,410.04, does not include invalidity pension.
 
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Thank you everyone for your help and I love the tax back company suggestion. I don't think I received any pay increases since being off work sick, but I will ask H.R. for confirmation of my gross pay plus benefits-in-kind for 2016, 2017 and 2018 before deduction of the invalidity pension.
I will update the post when I get confirmation. Thanks
 
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