by LIAM O'HALLORAN
WHENEVER an individual pays pay as you earn (PAYE), pay related social insurance (PRSI) or the universal social charge (USC), there arises the possibility of a payroll (PAYE, PRSI, USC and/or local property tax) refund.
In order to understand tax refunds, it is important that you understand where the money has gone.
When an individual is paid by their employer, the employer is bound by law to apply three separate charges – tax also known as pay as you earn (PAYE); pay related social insurance (PRSI), (prior to 2012 this charge also included the health levy (also referred to as health contributions), and the universal social charge (USC).
For PAYE and USC refunds, Revenue can process refunds via the website Revenue/MyAccount.ie. You can check whether you paid the right amount of tax for previous years and whether the right details are being used to make your tax deductions this year.
If you have paid too much tax, you can get a tax refund. You must claim a tax refund within the four years after the year in which you made the over-payment. To claim tax back you must make a tax return. If you have paid too little tax, you will owe Revenue the difference between what you actually paid and what you should have paid.
There are different options to repay the tax depending on the amount you owe.
Regarding checking your tax credits for the year, your tax credit certificate shows the tax credits that your employer is deducting from your tax bill this year. You can view your tax certificate online using the Revenue website myAccount.
If you find out during the year that your tax credits are not correct, then contact Revenue so that any refund due can be paid to you by your employer. It is also important to check you are not claiming tax credits you are not entitled to, as this will result in an under-payment of tax.
To check if you are due a tax refund or owe tax for a previous year, you can use myAccount to check whether you have paid the correct amount in the previous four years. You can see a statement that shows if you have paid too much tax or too little tax. This is called a preliminary end of year statement. It is based on the information Revenue has.
There may be other information that could affect how much you owe. For example, you may haveother income or you may be entitled to tax credits that you have not claimed. To get a final statement you must get a statement of liability. You may have overpaid tax if you become unemployed or are out of work on sick leave. You may also have overpaid tax if your tax credits are incorrect or you haven’t claimed tax relief for certain expenses.
To get a tax refund, you can claim a tax refund by making a tax return if your preliminary end of year statement shows that you have paid too much. Refunds are paid by cheque or by bank transfer if you give Revenue your bank account details.
To repay tax you owe, if your statement of liability shows that you owe tax of less than €6,000 then you have the option to pay all or part of it through myAccount, or pay all or the remaining part of it by having your tax credits reduced for up to four years. If the amount you owe is over €6,000, you can pay the amount through myAccount or contact Revenue to discuss repayment options. An underpayment will remain on your tax record with Revenue until it is paid. You may have to pay interest and penalties if you owe tax to Revenue.
And remember – if you refuse to repay tax that is due, Revenue can take you to court!
• Liam O’Halloran is an accountant with FDC in Bandon.
