Advice please - income levy refund for salary in arrears

Luluk

Hi all,

I was wondering if someone could advise me. I found out last year that my employer had been underpaying me since 2006. My employer agreed and paid full arrears in May 2010, but I had to pay three years of income levy out of it, even though much of this income was earned before the income levy came into existence. At the time, my employer told me I'd be able to apply for a refund at the end of the tax year. So in January 2011 I sent Revenue my P60, my income levy certificate and a letter from my employer explaining the situation, but was told that I am not eligible for a refund. Apparently it doesn't matter that I earned this money between 2006-2009; because it was paid in 2010, it seems I have to pay income levy on it dating back to 2006. I find this very unfair, and am wondering if there is any way to appeal this decision, or if I should even bother. If anyone can offer me some advice, I'd be very grateful.

barneystinson

Luluk wrote: »

Hi all,

I was wondering if someone could advise me. I found out last year that my employer had been underpaying me since 2006. My employer agreed and paid full arrears in May 2010, but I had to pay three years of income levy out of it, even though much of this income was earned before the income levy came into existence. At the time, my employer told me I'd be able to apply for a refund at the end of the tax year. So in January 2011 I sent Revenue my P60, my income levy certificate and a letter from my employer explaining the situation, but was told that I am not eligible for a refund. Apparently it doesn't matter that I earned this money between 2006-2009; because it was paid in 2010, it seems I have to pay income levy on it dating back to 2006. I find this very unfair, and am wondering if there is any way to appeal this decision, or if I should even bother. If anyone can offer me some advice, I'd be very grateful.

You'd be wasting your time appealing it:
Section 985 of TCA 1997 says
"985.—On the making of any payment of any emoluments to which this Chapter applies, income tax shall, subject to this Chapter and in accordance with regulations under this Chapter, be deducted or repaid by the person making the payment notwithstanding that—

(a) when the payment is made no assessment has been made in respect of the emoluments, or

(b) the emoluments are in whole or in part emoluments for some year of assessment other than that during which the payment is made. "

The gist of this is that you are taxed on PAYE income, at the rates that prevail in the year you are paid, regardless of the year the income actually relates to.

It's unfortunate that this has worked out against you - however, if it was the case that tax rates in 2010 were lower than 2006-09, you'd be delighted to have had to pay less tax...

Also, if the amount of back-pay you got is substantial, it is possible that you paid income levy at a higher rate than you should have, but I would hope/expect that Revenue would have checked that already. If your earnings for the year are between €15,028 and €75,036 you should have paid levy at 2%, so if the back-pay was subject to a higher rate of levy, then you would be due a refund.

highgiant1985

Luluk wrote: »

Hi all,

I was wondering if someone could advise me. I found out last year that my employer had been underpaying me since 2006. My employer agreed and paid full arrears in May 2010, but I had to pay three years of income levy out of it, even though much of this income was earned before the income levy came into existence. At the time, my employer told me I'd be able to apply for a refund at the end of the tax year. So in January 2011 I sent Revenue my P60, my income levy certificate and a letter from my employer explaining the situation, but was told that I am not eligible for a refund. Apparently it doesn't matter that I earned this money between 2006-2009; because it was paid in 2010, it seems I have to pay income levy on it dating back to 2006. I find this very unfair, and am wondering if there is any way to appeal this decision, or if I should even bother. If anyone can offer me some advice, I'd be very grateful.

unfort as mentioned revenue gave guidelines that any arrears payment for income levy is treated as subject to the income levy rates for the year you get paid regardless of when the payment relates to.

It does suck but they are v strict on this.

This is diff from the dept of Finance stance however on the pension levy. If you have been paid arrears going back to 2006 for example you DO not have to pay Pension levy on the arrears earned while the pension levy didn't exist. (i.e. before 2009 was it march or may i can't recall) but you do have to pay pension levy on arrears relating to the period when pension levy did exist.

Luluk

Thanks for the replies, guys. It's really annoying, given that if I'd only noticed in 2006 that my pay was wrong, this never would have happened. Needless to say I'll be more vigilant in the future and won't just assume the nice people in the payroll office and HR are right. It does seem unfair that I won't get a refund, but I can understand the argument that it could have gone the other way, in which case I could have profited from the situation. I haven't earned over 75K, so it looks like I have no nice cheques from Revenue to look forward to

barneystinson

Luluk wrote: »

Thanks for the replies, guys. It's really annoying, given that if I'd only noticed in 2006 that my pay was wrong, this never would have happened. Needless to say I'll be more vigilant in the future and won't just assume the nice people in the payroll office and HR are right. It does seem unfair that I won't get a refund, but I can understand the argument that it could have gone the other way, in which case I could have profited from the situation. I haven't earned over 75K, so it looks like I have no nice cheques from Revenue to look forward to

No, you don't have to have earned over 75k to be due a refund; my point was that the Income Levy on the arrears, if it was a big amount all paid at once, may have been a higher rate than you would be liable to when the whole year is looked at. The levy is charged separately in each specific pay period, i.e. if you are paid weekly, the income levy is calculated based on the gross amount in each individual week. Here's an example of what I mean:

Say your GROSS salary is 31,200k, paid equally as 600p.w. over the year; you'll have paid Income Levy at 2% = €624.

Now say you still earn the same amount, but you get 26k of it paid as 500 p.w., and the remaining 5,200 is all paid in one go in a particular week...

In this scenario you would pay 2% on the 51 weeks @ €500 = €510
In the other week, where you grossed €5700 (€500 + €5,200), you will have paid Levy of €5,700 @ 6% = €342
Total Income Levy of €852 in this scenario, compared to €624 where there is no big lump sum distorting the levy.

So, if your pay is less than €75k, and the arrears you received meant you earned over €1,443 in a particular week, then you will have an Income Levy overpayment. But as I said in my 1st post, I would have thought the Revenue staff who examined your claim should have checked that the amount of levy you paid was correct relative to your gross income. Either way I wouldn't be expecting any huge cheques, as you'll be talking about at most 4% of the arrears...

Luluk

Ah, I see what you mean, thanks for the explanation. At the time Revenue emailed me to say that I wouldn't be entitled to a refund (replying to a general query I had made about the matter), they hadn't started looking at the documentation I sent them. I expect I'll get a small refund once they look at it closer. Up to 4% is better than nothing, I guess

barneystinson wrote: »

But as I said in my 1st post, I would have thought the Revenue staff who examined your claim should have checked that the amount of levy you paid was correct relative to your gross income. Either way I wouldn't be expecting any huge cheques, as you'll be talking about at most 4% of the arrears...