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Tax Sucks

  • 15-05-2008 1:33pm
    #1
    Registered Users, Registered Users 2 Posts: 15,046 ✭✭✭✭


    Hey Folks,

    Sorry if this is the wrong forum I wasn't sure which forum was appropriate for this thread.

    I was given a bonus in my job this year and it was paid into my bank account today along with my regular wages. I'm normally on the lower tax band but because of the extra money revenue took 50% of my bonus on me... :( That kinda sucks. I think there's nothing I can do as that's just how the tax system operates but it seems unfair. All year around I'm on the lower tax brand as I'm not exactly making a killing but I get a bonus and I suddenly shoot up to the 50% bracket.

    I kinda work in a cloak and dagger company and I just found out that some of the other managers are in on a company pension scheme and some have opted to have their bonus put into this tax free. It seems that to become part of the pension scheme (according to a senior manager) you have to have been working with the company for 5 years - I'm here six. I asked another recently promoted (within the last year) manager and he was never told of the scheme either. I also found out that after 5 years we are both eligble for an extra day's holiday during the year but we were never told of this either.

    So apart from loosing 50% of my bonus the pension scheme was never mentioned to me and probably won't be as well as the extra days holiday. So I'm a little annoyed. Is there anything I can say/do with the tax office about the bonus thing?


Comments

  • Registered Users, Registered Users 2 Posts: 68,317 ✭✭✭✭seamus


    eo980 wrote: »
    So apart from loosing 50% of my bonus the pension scheme was never mentioned to me and probably won't be as well as the extra days holiday. So I'm a little annoyed. Is there anything I can say/do with the tax office about the bonus thing?
    Standard clawback should apply. Your tax is probably calculated on a monthly basis. Just to do some rough figures;

    Let's say you earn €2k/month, and of that, €1500 is taxable @ 20%. The cut-off point for the higher tax band is at €2,500.

    So every month, your tax payable is €300. This means that on earnings of €24k/year, you're taxed on €18k of that and you pay €3,600.

    Let's say you get a bonus of €2k one month. Your total earnings are €4k, of which €2k is taxable at the lower rate of 20% and €1,500 is taxable at 50%. So that month you pay €1,150 in tax.

    At the end of that year, your earnings will have been €26k. The cut-off for the higher band of tax is €30k. So if €20k of your earnings are taxable, you should have paid €4k in tax, right?

    However, if you work out what you actually paid that year, it will work out to €4,450. So you'll have overpaid by €450. Most employers have systems which forsee this and put in a rolling clawback, where you will receive that €450 back through lower tax deductions as the year rolls on. Other employers don't bother, and you will have to go the tax office with your P60 and claim your overpayment back at the end of year.

    You probably haven't lost 40% of your bonus.

    As regards the pension/holiday thing, it all depends on contracts. Allowing employees to contribute tax-free to their pension is not an issue, but you should be querying with HR as to why you were never given the option of a pension or an extra day holidays. Although other people are getting it, that doesn't necessarily mean you're entitled to it.


  • Registered Users, Registered Users 2 Posts: 15,046 ✭✭✭✭Kintarō Hattori


    Thanks for that Seamus. You lost me really but I'll go over it with a fine tooth comb. On the other subject it seems I do qualify for the pension and the extra day's holidays as it seems the only stipulation is to have been there 5 years and I'm there 6.


  • Registered Users, Registered Users 2 Posts: 9,398 ✭✭✭markpb


    eo980 wrote: »
    Thanks for that Seamus. You lost me really but I'll go over it with a fine tooth comb. On the other subject it seems I do qualify for the pension and the extra day's holidays as it seems the only stipulation is to have been there 5 years and I'm there 6.

    Basically what he's saying is that tax is payable based on yearly limits, not monthly limits. If you pay too much tax one month, you can claim it back at the end of the year.


  • Registered Users, Registered Users 2 Posts: 18 Suprman


    markpb wrote: »
    Basically what he's saying is that tax is payable based on yearly limits, not monthly limits. If you pay too much tax one month, you can claim it back at the end of the year.

    You can put cash into your own pension scheme (PRSA) and claim tax back that way. Simply, if you earned €1000 at the top rate of tax and roughly received €600 after tax, and you put €1000 into your pension you can claim €400 tax back.

    Pension contributions (within limits) are tax free. This is why it is more benificial to people on the top rate.

    :)


  • Registered Users, Registered Users 2 Posts: 15,046 ✭✭✭✭Kintarō Hattori


    markpb wrote: »
    Basically what he's saying is that tax is payable based on yearly limits, not monthly limits. If you pay too much tax one month, you can claim it back at the end of the year.

    Ahh thank you sir. I understand that!


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  • Registered Users, Registered Users 2 Posts: 68,317 ✭✭✭✭seamus


    markpb wrote: »
    Basically what he's saying is that tax is payable based on yearly limits, not monthly limits. If you pay too much tax one month, you can claim it back at the end of the year.
    All that effort wasted by one concise line :(


  • Registered Users, Registered Users 2 Posts: 766 ✭✭✭mkdon05


    seamus wrote: »
    All that effort wasted by one concise line :(

    In fairness Seamus, a lot of that info you gave was incorrect. Looked a little bit like the old tax system? Tax free allowance era?


  • Registered Users, Registered Users 2 Posts: 68,317 ✭✭✭✭seamus


    Ah, I was just trying to make it simple. Easy figures and and so forth. It's still easier to think in terms of TFA's than tax credits.


  • Registered Users, Registered Users 2 Posts: 15,046 ✭✭✭✭Kintarō Hattori


    Thanks for the detailed reply Seamus but it did kinda go over my head. Maybe it's simple to understand but figures and allowances and credits etc etc. Nasty stuff.


  • Registered Users, Registered Users 2 Posts: 15,046 ✭✭✭✭Kintarō Hattori


    markpb wrote: »
    Basically what he's saying is that tax is payable based on yearly limits, not monthly limits. If you pay too much tax one month, you can claim it back at the end of the year.

    I know you can pay too much tax but that doesn't happen that often right? How will this bonus tax affect me for the rest of the year? Will I end up paying less tax now each month until the end of the year because they taxed me so much on this or can they tax me as much as they like if I earn more etc.


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  • Registered Users, Registered Users 2 Posts: 766 ✭✭✭mkdon05


    the only way we can really help you is with the figures, and if your single or married.


  • Registered Users, Registered Users 2 Posts: 9,398 ✭✭✭markpb


    seamus wrote: »
    All that effort wasted by one concise line :(

    Your reply will probably make a lot more sense now that he's read the executive summary :)
    eo980 wrote: »
    I know you can pay too much tax but that doesn't happen that often right? How will this bonus tax affect me for the rest of the year? Will I end up paying less tax now each month until the end of the year because they taxed me so much on this or can they tax me as much as they like if I earn more etc.

    Like Seamus said, it depends on the company and the software (or accountant!) they use. Some will factor in that you've overpaid tax and will charge you slightly less (each month) for the rest of the year so it balances out. Others will ignore the bonus so you'll go back to paying the same level of tax you did before. If that happens, you'll need to get the revenue to send a balancing statement next year so you can claim back the excess.


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