# Under payment of tax by OAP's



## browtal (6 Jan 2012)

I would be grateful if any contributor could give a couple of examples of how O.P. will be effected by todays revelations that they may have been *underpaying their income tax*. 
With no tax reliefs for mortgage etc.

Could you give a couple of examples ie.

* Income of a couple*

          Company pension                                             €18,700
          State Pension                                                   22,700


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## WindUp (6 Jan 2012)

are both people 65+? 
are both incomes earned by one partner?


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## horusd (7 Jan 2012)

Isn't it fairly straight-forward, the pension reduces the tax credits and taxes are re-jigged accordingly? If this is right, use a tax calculator like hookhead to get an idea of the impact.


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## mathematics (7 Jan 2012)

Some of the differences in tax now due are so small that it appears to relate to a figure that Rev determined to be the Soc Wel State Pension in prior years.   The figure used for 2012 appears to be 230.30 x52 weeks gross - which is 365 days
Q - will this change in a leap year 

Q What is the figure in prior years when there was lesser amount but an additional week i.e. Christmas Bonus 52 and 53 weeks when double payment.  
Q - What happens if the figure changes the end of year Dec 31 and Jan 1 is mid week with two different values.  
Q - Does the figure change in these circumstances 
Finally is there any webpage that shows the actual annual figure that the Rev will use for Contributory State Pension for each year


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## The Ghoul (7 Jan 2012)

I can't answer any of the questions asked but have one of my own related to this OAP pension issue - maybe this thread could be stickied for all similar questions?

My question is as follows, relatives of mine (a married couple who are jointly assessed) received letters, the man has a public sector pension, the woman has a private pension and *half* a contributory old pension

I found their tax credit certificates for 2009. For the woman, there is a section which states

*Standard Rate Band Reduced By*
DSFA Pension 5502 

*Tax Credits Reduced by*
DFSA Pension 1100

But in the section
*Allocation of tax credits and standard rate band *

The DFSA pension is not mentioned, only the private pension and the spouse's public sector pension are in there

Does it sound like there is a tax compliance issue here?

Now in the 2012 tax credit cert that was received with yesterday's letter the "Standard rate reduced by" DFSA figure is ~12,000. Have Revenue made a mistake and think that she is in receipt of a full old age pension rather than a half one?


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## browtal (7 Jan 2012)

Hello,
Yes both are over 65 yrs and both have medical card. Both have state and company pension is from husbands employment. Wife has small income from part time work.
Many thanks Browtal


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## Gulliver (7 Jan 2012)

browtal said:


> I would be grateful if any contributor could give a couple of examples of how O.P. will be effected by todays revelations that they may have been *underpaying their income tax*.
> With no tax reliefs for mortgage etc.
> 
> Could you give a couple of examples ie.
> ...


 

If this couple has been filling out the relevant tax forms as they are obliged to do,  then there is no change.  The only people affected are those who have, through deliberate concealment of income or through failure to read documents already provided to them, failed to comply with their tax obligations.


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## Protocol (7 Jan 2012)

The tax exemption limits for 65+ in 2012 are 18k single and 36k married.


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## Joe_90 (7 Jan 2012)

@browtal

Standard rate due on all €41,400 x 20% = 8,280
Less Credits
Married 3,300
PAYE x 2 3,300   
Old persons 490                                       7,090
Income Tax due €1,190


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## mathematics (8 Jan 2012)

*What is the Annual State Pension Amount for Tax Purposes ?.*

Again anyone know what is the figure that Rev used in prior years for Annual State Pension for Tax purposes - 




mathematics said:


> Some of the differences in tax now due are so small that it appears to relate to a figure that Rev determined to be the Soc Wel State Pension in prior years.   The figure used for 2012 appears to be 230.30 x52 weeks gross - which is 365 days
> Q - will this change in a leap year
> 
> Q What is the figure in prior years when there was lesser amount but an additional week i.e. Christmas Bonus 52 and 53 weeks when double payment.
> ...


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## browtal (8 Jan 2012)

For many Older People the example you use is indeed their situation that they got letters about.
Well done wwith your example.
Browtal


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## mathematics (11 Jan 2012)

Do anyone know what is the Annual SW contributory pension for Tax purposes for prior years.   For e.g 2011 weekly is the same as 2012 but 2012 has 366 days while 2011 has 365 days.
Revenue is using 230.30 x 52 weeks in their Tax Certs - seem to be ignoring the leap year.
Prior years there were different amounts so what is the figure for the previous four years.   Confusion arises because Soc Welfare provided a different annual figure to Rev for tax purposes.


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## STEINER (11 Jan 2012)

mathematics said:


> Do anyone know what is the Annual SW contributory pension for Tax purposes for prior years.   For e.g 2011 weekly is the same as 2012 but 2012 has 366 days while 2011 has 365 days.
> Revenue is using 230.30 x 52 weeks in their Tax Certs - seem to be ignoring the leap year.
> Prior years there were different amounts so what is the figure for the previous four years.   Confusion arises because Soc Welfare provided a different annual figure to Rev for tax purposes.



2008	COAP	223.30 PW
2009	COAP	223.30 PW
2010	COAP	230.30 PW
2011	COAP	230.30 PW

http://www.welfare.ie/EN/Publications/SW19_08/Pages/sw19_sect2.aspx 

http://www.welfare.ie/EN/Topics/Budget/bud09/Pages/Rates2009.aspx 

http://www.welfare.ie/EN/Publications/sw19_10/Pages/sw19_sect2.aspx 

http://www.welfare.ie/EN/Topics/Budget/bud11/Pages/bud11s6.aspx


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## Black Sheep (11 Jan 2012)

The taxation of the State Pension in conjunction with other pension is not as straight forward as it at first appears

EXAMPLE (1)
Mr & Mrs Brown are both age 66. As Mrs Brown was the homemaker she has no pension of her own
Mr. Brown has a full State Pension 230.30 + QA 206.30 = 436.60 x 52 = Total for both 22703.00
Mr Brown also has Occupation of 18700
His tax credits are Married       3300.00
                         PAYE          1650.00
                         Age             490.00  =  5440.00

Reduced by 4540.60 & and SRCOP *41800.00* reduced by 22703

*Tax payable 2841.00*

EXAMPLE (2)
Mr & Mrs White are both 66. Mr. White has a full State Pension  230.30
Mrs. White returned to employment after rearing family. She has a reduced rate of pension @ 225.80.  Total for both =  23717

Mr White also has an occupational pension of 18700
His tax credits are  Married    3300.00
                          PAYE       1650.00
                          PAYE       1650.00
                          Age          490.00   = 7090.00
Reduced by  4743.44 & SRCOP *52553.60* reduced by 23717

*Tax payable  = 1393.40*


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## Bronte (12 Jan 2012)

After that excellent example from Blacksheep you would wonder why revenue didn't take out large ads in the newspapers and do examples like that for the standard situation so everyone would have a fair idea if we are talking being out by a few quid or thousands.


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## Joe_90 (12 Jan 2012)

Good Example but its further complicated by marginal relief:
€41,403 - €36,000 = €5,403 x 40% = €2,161 Max Tax

An even more when the exemption was €40,000 in 2010 Max tax €561.


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## mandelbrot (12 Jan 2012)

Bronte said:


> After that excellent example from Blacksheep you would wonder why revenue didn't take out large ads in the newspapers and do examples like that for the standard situation so everyone would have a fair idea if we are talking being out by a few quid or thousands.


 
But what is the standard situation?!

Unless someone (being an elderly and not tax savvy person) sees their exact situation and circumstances mirrored in such a notice, they'll probably still be none the wiser, and no more capable of working out their position. My impression is, people in general don't want to know or understand about these issues, they just want everything to be OK!


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## Rusty Cogs (12 Jan 2012)

A couple of questions

Widow OAP >70

State Pension 12,688
Deed of Covenant 5,312
Company pension 4,000

Are DoC exempt from income tax and USC ?
If so, is she just liable for income tax and USC on the excess of 18k i.e. 4,000 @20% + 2%
How is this tax levied, is it taken at source or does she have to calculate and send in a cheque to the revenue ?

Cheers


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## ClubMan (12 Jan 2012)

Rusty Cogs said:


> Are DoC exempt from income tax and USC ?


I'm pretty sure that only tax relief applies but can't find anything definitive on it so far...


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## Black Sheep (13 Jan 2012)

Rust Cogs
 Hope this helps

Covenants are most effective if the recipient does not have a taxable income. *The amount you covenant may be taxable in the hands of the recipient. *It is important to note that money covenanted to people receiving a non-contributory pension or means tested allowance may affect their entitlement to the allowance in question


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## Bronte (17 Jan 2012)

mandelbrot said:


> But what is the standard situation?!
> 
> Unless someone (being an elderly and not tax savvy person) sees their exact situation and circumstances mirrored in such a notice, they'll probably still be none the wiser, and no more capable of working out their position. My impression is, people in general don't want to know or understand about these issues, they just want everything to be OK!


 
It's an awful pity the tax system wasn't more simple so people could easily figure it out.  Why isn't there in this day and age a computer programe that one can log onto at revenue.ie and type in income and hey presto it calculates the tax, prsi, levies etc.  Don't revenue have a system like that for themselves?


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## mandelbrot (17 Jan 2012)

Bronte said:


> It's an awful pity the tax system wasn't more simple so people could easily figure it out. Why isn't there in this day and age a computer programe that one can log onto at revenue.ie and type in income and hey presto it calculates the tax, prsi, levies etc. Don't revenue have a system like that for themselves?


 
Yes it's called ROS Offline - it doesn't come any simpler than that, inside or outside of Revenue AFAIK.

But if it's a bog standard PAYE case there are any number of online calculators that will do it - though IMHO anyone who has basic English comprehension skills, and is capable of adding, subtracting, dividing, and multiplying, should be able to work out their tax in 2 minutes on a piece of paper.

First €_x _@ 20%
Remainder @ 41%
Less Credits
Less Tax paid
= Tax due / refund due

It only gets remotely complicated if there's other sources of income, such as rental etc...


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## Bronte (18 Jan 2012)

mandelbrot said:


> Yes it's called ROS Offline - it doesn't come any simpler than that, inside or outside of Revenue AFAIK.
> 
> But if it's a bog standard PAYE case there are any number of online calculators that will do it - though IMHO anyone who has basic English comprehension skills, and is capable of adding, subtracting, dividing, and multiplying, should be able to work out their tax in 2 minutes on a piece of paper.
> 
> ...


 
And what about marginal relief, PRSI, social charge etc.  If it were so easy how come so many people can't understand the way it works.


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## dewdrop (18 Jan 2012)

Must agree with Mandeltrot.  I feel most people, including myself, just dont bother trying to figure out their tax. As Mandeltrot indicated it is fairly easy to estimate what your income tax will be. I just think a certain mystery has built up in some of our minds re the complexity whereas when you sit down and think about it its fairly simple.


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## mandelbrot (18 Jan 2012)

Bronte said:


> And what about marginal relief, PRSI, social charge etc. If it were so easy how come so many people can't understand the way it works.


 
So, are you saying you'd prefer if there was no marginal relief? 

In the context of pensioners, where this difficulty has arisen, there is no PRSI or USC on income from social welfare.

As far as I'm concerned the tax system is as complex as it is, due to case law and successive legislation over time - as a direct result of people wanting to find loopholes and weasel their way out of paying. Human nature being what it is, it's very naive to suggest that a tax code could ever be truly simple.


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## T McGibney (18 Jan 2012)

mandelbrot said:


> As far as I'm concerned the tax system is as complex as it is, due to case law and successive legislation over time - as a direct result of people wanting to find loopholes and weasel their way out of paying. Human nature being what it is, it's very naive to suggest that a tax code could ever be truly simple.



The Corporation Tax code is remarkably simple, and I would suggest that this blows the above argument out of the water. Unless perhaps companies like paying tax more than individuals?

The blame clearly lies with the fact that the system has been allowed to develop on an ad-hoc basis, with annual Budgets and Finance Acts and countless Revenue pronouncements and precedents in between, but with little long-term planning and co-ordination. The only area where there has been any long-term policy planning has been in the area of Corporation Tax.


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## Gulliver (18 Jan 2012)

I am an OAP (prefer the term Senior Citizen) and receive the contrib OAP without deduction of tax.  I have an occupational pension from which PAYE is deducted.  I have some PAYE income from a part-time position.  I have some non-PAYE income from contract work.  I should be the perfect target for the Revenue letter of 2 weeks ago - but I have not received any!!!!  Why??

P.S. I am fully tax compliant via ROS


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## mandelbrot (18 Jan 2012)

T McGibney said:


> The Corporation Tax code is remarkably simple, and I would suggest that this blows the above argument out of the water. Unless perhaps companies like paying tax more than individuals?
> 
> The blame clearly lies with the fact that the system has been allowed to develop on an ad-hoc basis, with annual Budgets and Finance Acts and countless Revenue pronouncements and precedents in between, but with little long-term planning and co-ordination. The only area where there has been any long-term policy planning has been in the area of Corporation Tax.


 
I'm not sure I'd agree entirely with that explanation - all legal systems evolve on an ad-hoc basis, they have to simply because the world doesn't stand still, and you can't keep going back and rewriting the whole rulebook every time a new issue emerges.

Correct me if I'm wrong (I wasn't even born, and Wikipedia is offline!) but my understanding was that Corporation tax was introduced in the mid or late 70s, before which companies were liable to income tax plus some kind of add-on tax/charge? So the policy makers / legislators had the relative luxury of a blank canvas to do their long-term planning and coordination at that time, as they were introducing a completely new tax.

I would imagine that politically it was a lot easier to deal with a lobby group that consisted of what the general population consider "the elite". Even numerically, up to the mid 70s I think there had only been a total of about 50,000 companies registered since the creation of the state, so any change was going to directly affect a smaller number of taxpayers.

Contrast that with trying to start with income tax again from scratch, I wouldn't fancy it, would you?!


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## mandelbrot (18 Jan 2012)

Gulliver said:


> I am an OAP (prefer the term Senior Citizen) and receive the contrib OAP without deduction of tax. I have an occupational pension from which PAYE is deducted. I have some PAYE income from a part-time position. I have some non-PAYE income from contract work. I should be the perfect target for the Revenue letter of 2 weeks ago - but I have not received any!!!! Why??
> 
> P.S. I am fully tax compliant via ROS


 
Do you file a Form 11 / Form 12?

I suspect you've answered your own question there anyway, 





Gulliver said:


> P.S. I am fully tax compliant via ROS


 
So your returns filed match the Revenue / DSP record of your income.


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## T McGibney (18 Jan 2012)

Well if Charlie McCreevy (to his credit) was able to turn the income tax code upside down in 2001 by switching to a calendar-year basis and replacing allowances with credits, it shouldn't have been beyond the policymakers at the time to set out a clear vision of a simplified flat-tax-type income tax  system and implement this on a phased basis. Unfortunately the opportunity to do this has now disappeared with the crisis in the public finances.


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## mandelbrot (18 Jan 2012)

T McGibney said:


> Well if Charlie McCreevy (to his credit) was able to turn the income tax code upside down in 2001 by switching to a calendar-year basis and replacing allowances with credits, it shouldn't have been beyond the policymakers at the time to set out a clear vision of a simplified flat-tax-type income tax system and implement this on a phased basis. Unfortunately the opportunity to do this has now disappeared with the crisis in the public finances.


 
Out of interest, what country's (or countries') income tax code would you model ours on, if you were going to do an overhaul Tommy?

A flat tax system would be quite a radical departure from our current system, and that of the rest of Western Europe! How is it working out in the countries that do have it in place I wonder (again without Wikipedia I'm a bit snookered, but several of the former communist bloc countries have it I think? Not sure if that instils me with confidence TBH!)

Was such a system ever even on the agenda for discussion in Ireland though? It'd probably be political suicide for whoever tried to push it through - you can just see the sensationalist headlines "*Everyone* is going to pay tax, no matter how little they earn! Tax rate will be halved for high earners!" etc...


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