Tax Treatment of Maternity Benefit

Green Mile

So Maternity is now taxed in payroll. It's subjected to PAYE and not USC or PRSI.

Can any please explain how this is taxed in payroll?

Does the government issue new tax certs to reduce the credits to account for the tax? If so, how is the tax office to know people are on Mat Leave? (surely they are not that sufficient to communicate to Social Welfare are they?)

Some companys dont pay Mat Benefit and in the past, people were just issued cheques and they simply lodged them. How are employers to handle this scenario?

Other companies take the Cheques and lodge them into the companies accounts and pay the staff each week/month as normal. Is this the way it should be handled going forward so the payroll department can handle the PAYE element of Maternity Leave?

I welcome any replies.

K

Alan Shore

http://www.revenue.ie/en/personal/faqs/taxation-welfare-benefits.html

otterj

Is this to be taxed on a month one basis Its not clear on the Revenue website

BPJen

Hi,

I know I'm late joining this discussion, but its something that comes up alot in work these days so I'll give my tupence worth.:o

Once an employee has filled the MB10 form and submitted to the DSP, within a week or 2 of the ML starting, Revenue will issue your employer with a new Tax Credit Cert indicating that your annual Tax Credit and Cut off Point have been reduced. This reduction is the taxation of your MB.

So if your employer is continuing to pay or even top up your wages while out on ML, then the MB is to be recorded as a non-taxable addition because the taxable portion has already been taken are of by reducing the Tax Credits and COP for the individual.

Originally it was going to work similar to the Illness Benefit, whereby the employer would deduct the tax but deducting it at source makes it alot easier for the employer to handle.

Louk3590

Hi

Just wondering if anyone could help me. I recently started on maternity leave. My employer is receiving my maternity benefit cheque and I receive my wages. Since I started on mat leave the tax I pay has increased by €40. I thought tat I would only b taxed on the difference between my wages and the maternity benefit as my tax credits have already been reduced. I was just wondering if I this is correct and I should b paying more tax.

Thanks for ur help

L

BPJen

Hi L,

I'm afraid that with this new taxation system for Maternity Benefit, the new mother is usually left less-off. The reason for this is that prior to you going on ML your Tax was more than likely calculated on a cummulative basis. This means that your tax was calculated based on your gross pay to date, i.e. from the 1st of January, using your tax credits and cut off points to date. So it speards the liability evenly over the year. If you received a gross pay of 600 pw and then you were out for a couple of days and only earned 200 in one week, then you would not have used your full tax credit therefore your tax will be lower on the week that you had less pay. The tax credit that wasn't used will be carried forward to the next pay period and used to offset against your tax liability. However when you get the new reduced tax credits and cop due to the MB, these are usually applied on a week 1 basis. Which means that the tax is now calculated on your gross pay for each week seperately using just the 1 tax credit and 1 cop and it also means that you cannot carry forward any unused tax credits.
So in most cases any body who receives these reduced allowances will be put on a week 1 basis and therefore pay more tax than they did previously.

It is quiet confusing, I know. Hopefully i have explained this ok for you.

otterj

Hi My friend has her tax credits reduced to nil since she started getting maternity benefit. Is this correct?

BPJen

otterj wrote: »

Hi My friend has her tax credits reduced to nil since she started getting maternity benefit. Is this correct?

Not for Maternity Benefit. I would tell her to contact Revenue directly and query why her credits have been reduced to nil.
Ordinarily someone who is on ML has their annual Tax Credit and Cut-off Point reduced by 20%. This would give an employee reduced allowances to use against any pay for the balance of the tax year. But I've never heard of someone having their Tax Credits cleared altogether. Get her to contact them and see what they say. It could be a mistake on thier part or the employers.

StarletG

Sorry to resurrect this post but I have another query. I started my maternity leave last September & since then my credits have been reduced from €275 to €49.42 monthly & €63.47 to €11.21 weekly. I'm on a week 1/ Month 1 basis. My company is topping up my wages but each month I'm coming out with around €300-400 net less than before. I'm just baffled. I rang revenue & they said to send my P60 in which i have done last week. My tax cert for 2014 arrived this week & yet again my credits are low. I rang revenue again & the girl said I will be on this Cert for the year even though my leave ends in February. It's the way they tax the maternity benefit for those getting topped up she said. But how can my wages be so low? I just don't understand it. Can anyone help please?

BPJen

StarletG wrote: »

Sorry to resurrect this post but I have another query. I started my maternity leave last September & since then my credits have been reduced from €275 to €49.42 monthly & €63.47 to €11.21 weekly. I'm on a week 1/ Month 1 basis. My company is topping up my wages but each month I'm coming out with around €300-400 net less than before. I'm just baffled. I rang revenue & they said to send my P60 in which i have done last week. My tax cert for 2014 arrived this week & yet again my credits are low. I rang revenue again & the girl said I will be on this Cert for the year even though my leave ends in February. It's the way they tax the maternity benefit for those getting topped up she said. But how can my wages be so low? I just don't understand it. Can anyone help please?

Hi StarletG,

If I were you I would contact Revenue again and ask to be told exactly what the reduction for Maternity Pay is. The rules, as we know it, for taxation of Maternity Pay is this; If someone is in receipt of €230 per week from the DSP for Maternity Pay (MP) and that person takes the full entitlement of 26 weeks that MP figure totals €5980. That figure re3duces that persons annual Cut-off-Point and 20% of that figure reduces that persons annual Tax Credit. The new Cut-off-Point and Tax Credit are then applied to the employee on a Week/Month 1 Basis for the balance of the Tax year. So if you take a standard employee with standard rate Tax Credits (TC) and Cut-off-Points, (COP) it would look something like this -
Std Annual COP- 32,800 Monthly - 2733.33 weekly - 630.76
reduce by MP 5980 = new COP - 26820 = Mthly -2235 & Wkly - 505.38
Std Annual TC- 3300 Monthly - 275 weekly - 63.47
reduce by 20% of 5980= 1196 new annual TC- 2104 mthly -175.33
wkly - 40.46
If your monthly TC was €275 this was the standard but for it to drop to €49.42 per month that would mean that the calculation Revenue have done is based on a Maternity Pay figure of €13524.80. Now there could be something else that they're looking at but the to me it seems incorrect and if thats what they have been applying since last year incorrectly you would be due a refund of some decription.
You are very welcome to drop me a PM if you want to discuss further.

I hope this helps in some way.

Regards

Jennie

StarletG

Jennie thanks so much for your reply. I've just had a look at my tax cert again and yes Rate Band 1 has been reduced by maternity benefit €13624 in 2013 & €13885 2014!! That's the Cert I've just received.
However, the Tax credits have been reduced by the correct amount for both years so they add up to €262 x 26 weeks.

I will ring revenue again t

StarletG

Sorry Jennie, I had another post typed but I've just noticed it didn't actually post.
I'll ring revenue tomorrow & try & find out what's going on.
Thanks again for your help!
Regards

Starlet

otterj

BPJen wrote: »

Hi StarletG,

If I were you I would contact Revenue again and ask to be told exactly what the reduction for Maternity Pay is. The rules, as we know it, for taxation of Maternity Pay is this; If someone is in receipt of €230 per week from the DSP for Maternity Pay (MP) and that person takes the full entitlement of 26 weeks that MP figure totals €5980. That figure re3duces that persons annual Cut-off-Point and 20% of that figure reduces that persons annual Tax Credit. The new Cut-off-Point and Tax Credit are then applied to the employee on a Week/Month 1 Basis for the balance of the Tax year. So if you take a standard employee with standard rate Tax Credits (TC) and Cut-off-Points, (COP) it would look something like this -
Std Annual COP- 32,800 Monthly - 2733.33 weekly - 630.76
reduce by MP 5980 = new COP - 26820 = Mthly -2235 & Wkly - 505.38
Std Annual TC- 3300 Monthly - 275 weekly - 63.47
reduce by 20% of 5980= 1196 new annual TC- 2104 mthly -175.33
wkly - 40.46
If your monthly TC was €275 this was the standard but for it to drop to €49.42 per month that would mean that the calculation Revenue have done is based on a Maternity Pay figure of €13524.80. Now there could be something else that they're looking at but the to me it seems incorrect and if thats what they have been applying since last year incorrectly you would be due a refund of some decription.
You are very welcome to drop me a PM if you want to discuss further.

I hope this helps in some way.

Regards

Jennie

Hi just used your calculation above Revenue are using a maternity figure of €13885 ... where did they get this figure from?

otterj

Sorry just realised its .. €262*53

otterj

The problem with this system if you are on a monthly pay run is that you process payroll a few weeks before pay date which means you will not have received all the maternity benefit from the DSP for the employee for that month . This means you are paying more tax from the gross salary (salary not including maternity benefit) because of the reduced tax credits and cut-off points. Obviously this will be included in next month pay run but how will it impact pay when Revenue put you back to normal tax credits and cut off point and you are still paid maternity benefit from the DSP.

galah

Confused here also. Been put on the week one due to maternity benefit, and taking 4 months unpaid leave after the mb runs out. Does this mean that I won't be able to carry over any unused credits for when I am put back on the payroll, or can I ring revenue after mb is over to be put back on the continuous assessment, as 4 month unpaid is a good bit of credits?

Or am I missing the point?

Also, why are they applying the mb for 52 weeks when it's only paid for 26 weeks?

annie1982

Hi,
Just wondering if anyone can shed light on this for me. I went back to work after maternity leave on the 23rd of June. I just received my payslip and I have been taxed €348 for the last fortnight. A tax cert sent out in Jan had me on week1/month 1 basis and one sent out on June 23rd has me on week1/month1 basis. All along I was paying roughly €230 in tax a fortnight? Which is generally normal enough for what I would have payed before maternity leave? Any thoughts on why it was so high or if it will continue this high. Can't get onto revenue till tmw morn. Thanks in advance.

allthedoyles

Week 1 basis in only an interim measure , and is not meant to be used continually .

Check the cert sent out to you in January against the one sent in June , and you may see a reduction in your tax credits , which may be the difference .

Maternity Benefit is fully taxable , so the difference is probably amount due to correct your taxes .

Find out why you are still on week1 and tell the tax office you want a cumulative tax credit cert.

bizhelp77

Hi guys

Similar situation here and right now I could cry I am so confused by it all.

Came back to work at the end of May, paid 1st of June and got tax back - asked payroll why (I had been taxed a bit more every month while on mat leave but assumed that was because of mat benefit being taxed which is right) - anyway they said it was because I was on a week1/month1 and had overpaid tax so happy days things would be back to normal on 1st July. Paid in July and was taxed about 300 more than I was expecting, rang revenue and they said week1/month1 was at fault and COP and credits reduced because of mb tax - switched me to cumulative and assured me in August I would not be taxed more because it should have all balanced out. Just got my payslip for August and am being taxed an extra 400 on top of what I was taxed last month. Rang revenue and they reckon tax cert is right and its just tax being clawed back even though she assured me last month I would not be taxed more.

Revenue have explained how mb tax is being taxed and I get it, I dont understand though why the rest of this year is now being reduced and why even though I have additional COP because of single parent family credit I am still coming out with less than before I had my baby.

Please can someone shed some light on this or do I just have to suck it up for the rest of the year then go to normal basis next year.

bizhelp77

Figured it out, spoke to revenue.

SO what it boils down to is they give you the benefit then take it back off your COP and credits when you go back to work. SO why pay PRSI if they are going to double tax you for it?

This country is an absolute joke.

CuteStuff

Hi all

I did not realise that the taxing of MB would be so bloody complicated and that it would result in a week 1 basis. I was looking forward to tax back now that I am on unpaid mat leave. No such luck.

Instead revenue advised me to look for a refund when I get 2014 P60!!!

Thank you revenue and most sincerely thank you government for being a useless bunch of turnips!!!

Why it cannot remain cumulative on lower credits if need be is beyond me. And to be honest the lady I spoke to sounded like it was her first day.

Rant over.... Lets see how much I can get for a 6 month old on ebay .....

xxtippchickxx

hey guys im back to work in november after MB so does this mean that when i go back im gunna be taxed for the 6months ive been off out of my wages??

Clients

Hi bizhelp77
I am like you and could cry at the moment!,p I returned to work in the public sector and continued on a week one basis. I rang the tax office and they put me on a cumulative basis and I then received a large tax rebate. I contacted my payroll as to why and they said that it was the tax offices error. When I contacted them they blamed my payroll. To cut a very long story short they are saying that everyone who returns to work after maternity stays on a week one basis for the remainder of the year. As a result my pay is now down about 80 a fortnight. I am wondering if anyone has any idea why this is the case and also who I owe the lump sum back to as revenue tell me it's my employer and my employer say revenue!!! I am really frustrated and also going back to work with a reduced pay packet for the remainder of the year is not helping!!! I would appreciate any help on this

otterj

Clients wrote: »

Hi bizhelp77
I am like you and could cry at the moment!,p I returned to work in the public sector and continued on a week one basis. I rang the tax office and they put me on a cumulative basis and I then received a large tax rebate. I contacted my payroll as to why and they said that it was the tax offices error. When I contacted them they blamed my payroll. To cut a very long story short they are saying that everyone who returns to work after maternity stays on a week one basis for the remainder of the year. As a result my pay is now down about 80 a fortnight. I am wondering if anyone has any idea why this is the case and also who I owe the lump sum back to as revenue tell me it's my employer and my employer say revenue!!! I am really frustrated and also going back to work with a reduced pay packet for the remainder of the year is not helping!!! I would appreciate any help on this

You got tax back ? Are you on a cumulative basis now or a week one? Not really sure from what you posted

Clients

Sorry I posted a message on this earlier but for some reason it is not showing. Also sorry if my story is confusing I am so fed up of it. Here goes in bullet format
-maternity since nov last yr
-jan this yr I recieved mb and employer topped it up. My payslip reads week one basis
-came off maternity in May and took a few weeks unpaid
-June payslip shows I am still on a week one tax cert
-called tax office and they returned me to a cumulative basis
-next pay cheque big tax rebate
-rang tax office. I owe it all back to my employer new tax cert issued
-rang employer who say I owe it to revenue
-get new tax cert with reduced credits and cop
-rang revenue, revenue say I am due more tax back
-payroll ring to say that when they run figures I am in a negative and that can't be the case
-rang revenue and they returned me to week one and said that all people returning from maternity leave stay on week one for the remainder of the yr
-my pay, tax credits and cop are now all down on week one and payroll blame revenue and revenue blame payroll
-revenue now tell me I owe my employer only half the extra money I got.

Am I supposed to be on a week one and who do I owe the extra money to. I am scared that I will get a huge tax bill at the end of the yr and that money will be gone!!! All help appreciated

Tow

You should have stayed on week one. Problem is Revenue train their staff on the job and manning the phones what the lowest grades do... Your employer must by law (this came in a year or so ago) apply any P2C (Tax Credit Certificate) they receive from Revenue for you, if not they can be fined and may be held liable. It is not up to them to question it, they get it, they apply it. Any problem is your problem. If you have negative net pay you should pay it back to payroll. Technically it can be treated as a loan (if Revenue Audit) from your employer, and as such is subject to BIK on the interest of 13.5%.

otterj

Ya its Revenues fault you should have stayed on a week one basis . Youll need to get a p21 balancing statement at the end of the year to get your final tax figure

bizhelp77

So I am on cumulative now - where does that leave me?

Tow

If you do nothing and your employers payroll software is any good it will carry forward the money owed and deduct it from your net pay until you have earned enought to pay it off.

mirrorwall14

I'm confused reading this! My job tops me up to my standard salary which is above the SRCP. I will be on maternity leave from December to June. My husband also earns in the higher tax bracket. Can anyone explain what I am to expect here?

Is my overall wage going to be down even though I'm being paid the equivalent amount in combination of MB and top up?

Do I continue to pay a reduced tax credit from June to December even though it shouldn't apply anymore? And if I do why wouldn't I get tax back?