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Yearly bonus - am I screwed until July?

  • 29-02-2012 6:20pm
    #1
    H3llR4iser
    Registered Users, Registered Users 2 Posts: 4,028 ✭✭✭


    Hi all,

    To make a long story short, I received an yearly bonus with the February payslip. My pay normally doesn't come anywhere close to the 41% taxation cutoff point, but with the extra money it went abouve it - a great deal. Not only the bonus has been largely reabsorbed by taxation, but what payroll office told me left me bewildered: I'm gonna pay taxation at 41% until my "gross taxable so far" dips back down under the cutoff point later this year.

    Numbers:

    Normal monthly gross: 2345
    Gross taxable for Feb (salary + bonus): 4458

    What they told me about the coming months, say March:

    Gross taxable so far (Jan+Feb+Mar): 9148;
    Gross taxable cutoff: 8200

    So, on next month's salary I'm gonna pay taxation at 41% on those 948 (9148-8200) euro abouve the cutoff point; This will continue until July,w hen I'll finally get below the cutoff point again. The extra tax money paid should then be refunded in the final few salaries of the year.

    Still, this means I'm gonna lose around 600 net euro over the next few months...please tell me I got something wrong in all that. Thanks.


Comments

  • #2
    Hungrycol
    Registered Users, Registered Users 2 Posts: 2,246 ✭✭✭Hungrycol


    Your Pay is €2345 per month and your cut off is €2733 per month:

    Jan
    Feb
    Mar: Cumulative Salary €9148, Cumulative Cut-Off Point €8200
    Apr: Cum Sal €11493, SRC €10933 (Balance €559 @41%)
    May: Cum Sal €13838, SRC €13666 (Balance €171 @41%
    Jun: Cum Sal €16183, SRC €16400 (All pay @ 20%)

    This means by the end of June all your salary year to date will have been taxed at 20%.


  • #3
    theg81der
    Closed Accounts Posts: 1,644 ✭✭✭theg81der


    "How are overtime pay, bonuses etc. taxed?

    Your weekly/monthly tax credits are set against your full weekly/monthly pay. If you earn overtime or bonus pay etc., these amounts are included as part of your pay for that week or month. You do not get any additional tax credits against these additional earnings."


    Thats from revenue.


    http://www.boards.ie/vbulletin/showthread.php?p=76804775 and theres a similar thread.


    Hope someone else has a better answer for you.


  • #4
    H3llR4iser
    Registered Users, Registered Users 2 Posts: 4,028 ✭✭✭H3llR4iser


    Hungrycol wrote: »
    Your Pay is €2345 per month and your cut off is €2733 per month:

    Jan
    Feb
    Mar: Cumulative Salary €9148, Cumulative Cut-Off Point €8200
    Apr: Cum Sal €11493, SRC €10933 (Balance €559 @41%)
    May: Cum Sal €13838, SRC €13666 (Balance €171 @41%
    Jun: Cum Sal €16183, SRC €16400 (All pay @ 20%)

    This means by the end of June all your salary year to date will have been taxed at 20%.

    Sorry, I don't follow you here...at least 1678 Euro are taxed at 41% until June; Of course, after June it will be back into normal with 20% taxation until the end of the year.

    Now, even if I want to consider those 1678 euro taxed at 41% as a "casualty" of the bonus, by the end of the year I will have come nowhere near the cutoff point - my gross figure will be 30143; To which no 41% taxation should be applied. Will I be able to claim anything back, or am I simply done for?

    Please let me understand this, because if that's the case, next february I will be saying "thanks but no, thanks" if any bonus comes around...


  • #5
    barneystinson
    Registered Users, Registered Users 2 Posts: 4,685 ✭✭✭barneystinson


    Hungrycol wrote: »
    Your Pay is €2345 per month and your cut off is €2733 per month:

    Jan
    Feb
    Mar: Cumulative Salary €9148, Cumulative Cut-Off Point €8200
    Apr: Cum Sal €11493, SRC €10933 (Balance €559 @41%)
    May: Cum Sal €13838, SRC €13666 (Balance €171 @41%
    Jun: Cum Sal €16183, SRC €16400 (All pay @ 20%)

    This means by the end of June all your salary year to date will have been taxed at 20%.
    H3llR4iser wrote: »
    Sorry, I don't follow you here...at least 1678 Euro are taxed at 41% until June; Of course, after June it will be back into normal with 20% taxation until the end of the year.

    Now, even if I want to consider those 1678 euro taxed at 41% as a "casualty" of the bonus, by the end of the year I will have come nowhere near the cutoff point - my gross figure will be 30143; To which no 41% taxation should be applied. Will I be able to claim anything back, or am I simply done for?

    Please let me understand this, because if that's the case, next february I will be saying "thanks but no, thanks" if any bonus comes around...

    What the above post illustrates is that the tax system works cumulatively. In each pay period (monthly in your case), your gross earnings for the whole year to date is calculated, and the tax is calculated accordingly.

    So what will actually happen is that in each of the months from March to June you will be refunded the tax deducted at the 41% rate, as the gap between your gross earnings and your standard rate cut-off point closes. Each month from March to June you will be refunded €81 {(2,733 - 2,345) x (41% - 20%)}, or rather you will pay €81 less tax each month than you otherwise would have, and your take home pay will be higher accordingly.


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