When I retired My Income was derived from 2 sources, Namely State Pension, and Approved Retirement Fund (ARF). Since Revenue will tax all of this income, there is no deduction of P.A.Y.E. Tax from the State pension at source. In order to collect this tax they adjust your Tax cert. by an amount equating the expected income of the state pension.This in most cases should suffice for correct application of tax deduction. When there is an increase in the said state pension, which may and usually comes into effect approx end of March of the following year,The Dept of social protection informs revenue of this increase,an revenue issues an amended cert.to reflect the increase.
Two things happened in my case, the adjusted cert. was now based on a week1/month1 basis, instead of a cumulative basis usually marked N on tax basis of your payslip, The second item I noticed was that since the increase only applied in March, so only 40 weeks of the increase should have applied, i.e.40 x €5 = €200. In their wisdom Social protection via Revenue applied 52 x €5 =€260 instead, so this was blatantly incorrect.
Seeking a remedy Revenue rectified this matter and the tax deductions reverted to a cumulative basis N. The Dept. of Social protection did not have a clue about what I was trying to inform them of, and it appeared they were not that interested in the glaring mistake they had made. Further correspondence was ignored.
However at the end of the year, the review of DSP income was correct in every way, i.e. 40 x €5 was applied, and along with medical expenses etc. a refund was forthcoming. I suppose one reason would be when a Christmas bonus is paid out, this is taxable as well. There is no time to issue a new cert
to cover this, An underpayment of tax may occur unless medical expenses cover the bonus payment by an increase in the tax credit applicable for these expenses. Perhaps someone out there may know why revenue apply Week 1/ Month 1 Basis of tax deduction?