Employer putting false figures on p45

cmc2015

Hi all,
Just looking for a few opinions on this, will keep it as clear and to the point as possible. I am a teacher who corrects pre papers for about 5 weeks every year in Feb/March. I have done so for the past 8 years. Last year I submitted a tax return for the previous 4 years and the p21 flagged an underpayment ever single year by this employer.
I eventually got it sorted, the company in questions issued Revenue with 4 cheques for the 4 years which were sent to me and I just passed them on to revenue. Sorted or so I thought.
So I got my paperwork together for 2014 to submit a return, I rang the company looking for a p45 statement to accompany my documentation for revenue. This is where things take a Ludacris turn. In 2014 I had a net pay of 412.80, but my p45 has a gross figure of 4941.97 appearing on it.
I am off the phone from the employer who is insisting that the 4 cheques that were issued (to revenue) are put on to my ‘’gross pay’’ figure as payment? I pointed out that the 4 cheques WERE NOT payment to me, but a payment to revenue for underpayment of 4 years taxes. The employer is having NONE of my argument and standing by his argument that any ‘payment’ made during the year is considered part of my gross, and that this is on the advice of revenue and his accountant.
20 minutes later and I was getting no where with him. My p45 going into revenue for 2014 has my earnings MASSIVELY overstated. Revenue don’t seem to want to entertain it and say I need to sort it with employer. All I want is correct figures going into revenue? Is there any organisation anyone can recommend to help deal with this, or any advice for where to go from here? All responses much appreciated.

Alan Shore

It's hard to figure out what you are saying but if I understand you correctly you were paid an amount each year from which tax should have been deduced.

Enough tax was not deducted, thus you ended with a liability. The obligation is on the employer to deduct the correct amount of tax. To correct this they have paid the tax for you and included this in your 2014 earnings. It was it appears their mistake which they have corrected. Overall you are better off.

seamus

Ultimately underpayment of PAYE is the employee's problem, not the employer's. The employer is obligated to deduct the tax at source, but if they make a mistake or fail to pay it, the financial obligation is on the employee to ensure that the full amount is paid.

The fact that your tax was underpaid for the last four years was an obligation on you to rectify, not your employer. They did you a favour by giving the money to you, but ultimately it counts as income to you.

cmc2015

Yes they made an underpayment of tax and rectified it last year with 4 cheques for 2010,2011,2012,2011 (approx 2000e)
However in submitting my gross payment figure for 2014 they have grossly inflated it by saying I earned 5000e when I only took home 421e! They are considering the 2000e they paid to revenue as underpayment of taxes last year as a 'payment to me' hence shooting my gross pay up to nearly 5000e! I only took home 421.80 in 2014 to be exact - having my gross as nearly 5000e is a complete false statement on the p45 but the employer is having absolutely none of it....

cmc2015

Hi Seamus,
Im not sure if I understand. Surely if you are being employed by someone they have an obligation to pay the correct amount of tax and if they don't it is up to them to rectify it? How can it make sense that anytime an employer does not pay the proper amount of tax the employee is caught for the mistake? Maybe I'm reading your response wrong??

Alan Shore

Take a step back.

In 2010, 2011, 2012 and 2013 you earned say €1000 from this employer they should have deducted €500 each year but instead they paid you €1,000. You made your returns and had a liability so they rectified the error by effectively paying your tax .

So they paid your tax and they also have to pay your tax on top of that. Not sure why your are complaining you got €1,000 when you should have only received €500. You are quids in here!

ceekay74

cmc2015 wrote: »

Surely if you are being employed by someone they have an obligation to pay the correct amount of tax and if they don't it is up to them to rectify it?

Any mistake in the amount of tax deducted is the employees problem, not the employer.

OP it sounds like your employer has sorted out your previous underpayments by paying you that money and then sending it to revenue.

It can't be retrospectively added on to previous years earnings because income is taxable in the year that you receive it.

Your employer was quite generous in this instance, assuming I understand you properly.

cmc2015

Alan not sure how Im quids in? I had an underpayment, employers coughed up and hence my accounts as such were balanced?
Surely anyone looking at this p45 they issued for 2014 looks like I earned 5000e when really my gross figure is really 1000e (approx) - thats my issue? The 'payments' they are saying I recieved in the region of 2000 I didnt recieve at all - revenue recieved that??. And still at that 1000e(real gross pay)+ 2000e(past underpayment of taxes cheques) = 3000e so I still dont know how they are coming up with 5000e . Shouldnt p45's and p60s etc reflect the correct gross earning figure? Or am I really missing something in all of this...

CIARAN_BOYLE

There is an Mock exam company that negotiates with teachers on a net basis and grosses up accounting for PAYE at 20% rather than taking into account paye/prsi/usc at the appropriate rate.

However as an employee you should make your wages arrangements based on a gross figure.

Any contract based on a net wage is likely to be dodgey and not worth the paper its written on. Revenue can and do gross up regularly in relation to this if there is an issue.

As an employee its your responsibility to ensure that your taxes are in order.

Basically what happened in previous years
Gross 2400 Net 2000 PAYE 400 USC 0

When you should have received (given your other earnings)
Gross 2400 PAYE 984 USC 168 PRSI 96 Net 1152

Your employer paid your liability so even though it went to Revenue it was a benefit in kind that you received.

Your problem is that you believed your arrangement with the mock company was for the net amount rather than net+innapropiate gross up.

BabySlam

OP do not look at just one year in isolation - look at the last 5 years and see if it balances out.

cmc2015

Hi Ciaran,
Thanks for that, it is indeed a mock exam company that pays you per script which is your net pay. We don't even get a payslip, just a piece of paper saying how many scripts we corrected multiplied by the rate and the net figure, which is the amount on the cheque. Sure I've that calculated before i get the cheque. We never get a formal payslip that breaks down our gross, tax, usc etc. It just comes across shady....I think the only thing I can do is photo copy all correspondance and send it to revenue to see what their final say is on it...

cmc2015

Babyslam,
Unfortunately I did not request a p45 for the rest of the years so no idea what gross figure they were putting in for me. When the balancing p21s came out showing the underpayments it was requested they all be sent to the employers accountant to sort it out, so sadly I don't have the relevant paperwork for those years to really do a calculation over the few years. Its actually all a mess to be honest, and I presume I will have this all to look forward to again in 2015. Will be the last year...

Stheno

How much do they show for tax deducted?

blobbie

Do you fill a form 11 or form 12 ? If not, you should, especially if you have a few sources of income.

I'm not sure what the numbers are but the probability is that revenue have also slapped some form of interest & penalty charges for non payment of taxes when due.

CIARAN_BOYLE

cmc2015 wrote: »

Hi Ciaran,
Thanks for that, it is indeed a mock exam company that pays you per script which is your net pay. We don't even get a payslip, just a piece of paper saying how many scripts we corrected multiplied by the rate and the net figure, which is the amount on the cheque. Sure I've that calculated before i get the cheque. We never get a formal payslip that breaks down our gross, tax, usc etc. It just comes across shady....I think the only thing I can do is photo copy all correspondance and send it to revenue to see what their final say is on it...

I'd say your current position is the final position. You will have to mark this down as an expensive lesson learned. Negotiate with an employer based on gross pay. Don't accept a net pay figure and expect your employer to gross this up properly.

Banjoxed

Agreeing to pay an employee a specific net amount is a mistake that no employer should make. It can be, as in this case, hugely expensive to rectify.

Gross pay can become a multiple of net pay for many reasons, based on the tax credit and tax free payment which are unique to each tax payer and can vary widely from year to year, depending on social welfare, joint assessment and any clawback by Revenue of previous liabilities through the PAYE system. If OP has their liabilities to Revenue cleared by the employer they are fortunate.

jahalpin

cmc2015 wrote: »

Hi Ciaran,
Thanks for that, it is indeed a mock exam company that pays you per script which is your net pay. We don't even get a payslip, just a piece of paper saying how many scripts we corrected multiplied by the rate and the net figure, which is the amount on the cheque. Sure I've that calculated before i get the cheque. We never get a formal payslip that breaks down our gross, tax, usc etc. It just comes across shady....I think the only thing I can do is photo copy all correspondance and send it to revenue to see what their final say is on it...

From reading this it appears that you are not actually an employee but a self-employed contractor

The major distinction between the two is that if you were an employee, your employer would be responsible for deducting the correct taxes and paying them over to Revenue, however, as a contractor you are your employer and are responsible for all tax issues

Are you sure it's a P45 that are submitting as this a Cessation of Employment form and is not normally an annual occurrence?

If Revenue decide that you are in fact self-employed and have not been paying tax there are likely to be fines and penalties applied

seamus

cmc2015 wrote: »

Hi Seamus,
Im not sure if I understand. Surely if you are being employed by someone they have an obligation to pay the correct amount of tax and if they don't it is up to them to rectify it?

The obligation is on the employer to collect tax from the employee on Revenue's behalf.

If they fail to do this, revenue will be annoyed, but ultimately the tax has to be collected from the employee, because...

How can it make sense that anytime an employer does not pay the proper amount of tax the employee is caught for the mistake?

Because it's a tax on income. Look at it this way - imagine you earn €1,000 and the correct tax to be paid on it is €200. The employer by accident gives you €900 and sends €100 to Revenue.
That means that your net income is now €100 more than it should be, and you've underpaid your tax.

Correct the underpayment of tax is not penalising the employee because you shouldn't have had that money in the first place.

As Alan has said - you're quids up here. Your former employer has paid your tax liability.

jahalpin

seamus wrote: »

Ultimately underpayment of PAYE is the employee's problem, not the employer's. The employer is obligated to deduct the tax at source, but if they make a mistake or fail to pay it, the financial obligation is on the employee to ensure that the full amount is paid.

The fact that your tax was underpaid for the last four years was an obligation on you to rectify, not your employer. They did you a favour by giving the money to you, but ultimately it counts as income to you.

This is totally wrong. The employer deducts the tax at source as an agent of the Revenue and is liable for paying this over to the Revenue. Once the money has been deducted at source the employees liability is satisfied

This can be proven in cases of liquidations where the Revenue are priority creditors due to the fact that PAYE/PRSI/USC and VAT have been collected by the company and are being held in trust for the Revenue, the Revenue cannot try to claim from former employees of the company if the company fails to pay its obligations

cmc2015

Hi all to the person who wanted to know what the tax is -

P45 was issued (employer would not issue a p60)
Gross: 4941.97
Tax deducted: 1932.05
usc deducted: 310.42
Net pay 421.80

I havent even checked with revenue to see if the p45 figures actually coincide with what was actually paid.
No I am not self employed. I am employed by this company on a net pay fee, they work backwards to calculate gross etc, but in all the 8 years I am working for them not once was a wage slip issued, nor a p60, nor a p45 or any documentation of gross figures untill I went looking for it myself, and then the flaws seemed to appear. I realise now operating on a net pay payment is asking for this kind of trouble now. I guess I just took it that it wasnt a rocket science to calculate the gross figure back from net pay every year and pay the taxes accordingly, but for some it must be!
Will just put my case to revenue and see can they balance it all out so that when I submit my annual tax returns my tax refund isnt all tied up in an underpayment by this crowd.....

Stheno

cmc2015 wrote: »

Hi all to the person who wanted to know what the tax is -

P45 was issued (employer would not issue a p60)
Gross: 4941.97
Tax deducted: 1932.05
usc deducted: 310.42
Net pay 421.80

I havent even checked with revenue to see if the p45 figures actually coincide with what was actually paid.
No I am not self employed. I am employed by this company on a net pay fee, they work backwards to calculate gross etc, but in all the 8 years I am working for them not once was a wage slip issued, nor a p60, nor a p45 or any documentation of gross figures untill I went looking for it myself, and then the flaws seemed to appear. I realise now operating on a net pay payment is asking for this kind of trouble now. I guess I just took it that it wasnt a rocket science to calculate the gross figure back from net pay every year and pay the taxes accordingly, but for some it must be!
Will just put my case to revenue and see can they balance it all out so that when I submit my annual tax returns my tax refund isnt all tied up in an underpayment by this crowd.....

That still doesn't look right as the three figures above plus PRSI should add up to the total gross, and it doesn't.

I think what you need to do is to get your earnings for the last five years net from this job, and total those up and work out your tax liability.

As you are a teacher, is this a second job, so you get your main salary from your day to day teaching job?

It's impossible to have a vanilla approach to calculating tax due for individuals given the myriad credits and personal circumstances out there

cmc2015

Yes I teach full time so this is just a side job for a few weeks in feb/mar. I would assess my last 5 years if I had the paperwork, but as I only have net figures to go with its pretty useless. I'll just try to get on top of it for this year and next and see what a different company for the mock exams are like to work for. I will be a little bit more educated on what information to supply them to tax me properly and to keep on top of up to date wage slips and p60s. Thanks everyone for the responses, was great to get the feedback and has given some food for thought!

ceekay74

jahalpin wrote: »

The employer deducts the tax at source as an agent of the Revenue and is liable for paying this over to the Revenue. Once the money has been deducted at source the employees liability is satisfied

Sorry, this is misleading.

Payment of the correct tax is ultimately the responsibility of the individual taxpayer. NOT the employer.

In a situation where the deductions have been made by the employer, but not sent to revenue (due to ceasing trading), the employee has no liability, BUT only if the correct deductions were made.

seamus

jahalpin wrote: »

This is totally wrong. The employer deducts the tax at source as an agent of the Revenue and is liable for paying this over to the Revenue. Once the money has been deducted at source the employees liability is satisfied

Not totally wrong, but yes you are right in that instance. Where the employer deducts it but doesn't pay it, then they are liable.

Where they fail to deduct it, the employee is liable.

In this case if the employer deducted the tax, then their method of remediating this issue is all wrong.

Alan Shore

seamus wrote: »

Not totally wrong, but yes you are right in that instance. Where the employer deducts it but doesn't pay it, then they are liable.

Where they fail to deduct it, the employee is liable.

In this case if the employer deducted the tax, then their method of remediating this issue is all wrong.

Just so I get this right where an employer has no cert of tax credit and standard rate cut off for an employee the employer does not have to operate emergency tax anymore?

barneystinson

Alan Shore wrote: »

Just so I get this right where an employer has no cert of tax credit and standard rate cut off for an employee the employer does not have to operate emergency tax anymore?

Oh they sure do, and just to try to bring this back to what actually matters here, which is the applicable legislation and regulations:

Section 986 TCA97 empowers the Revenue Commissioners to make regulations in respect of the assessment, charge, collection and recovery of income tax under the PAYE system. Including specifically "for making the person, who is required to make a tax deduction, accountable for the tax and liable to pay it to the Revenue Commissioners".

Regulation 4 of the INCOME TAX (EMPLOYMENTS) (CONSOLIDATED) REGULATIONS, 2001 (S.I. No. 559 of 2001), states:
"Persons who are required to make any deduction or repayment referred to in these Regulations shall, in the case of a deduction (whether or not made), be accountable for the amount of the tax, and liable to pay that amount, to the Revenue Commissioners".

So from the above it is very clear that Revenue absolutely have the right to seek the appropriate tax from an employer in a case where they have EITHER failed to deduct or remit tax.

Entirely separate from this is the question of an individual's liability to income tax on their gross income.

In the Op's case it appears a net-pay arrangement was in place; the employer has acknowledged this and appears to have dealt with it accordingly, so nothing more to see here really.

ceekay74

ceekay74 wrote: »

Payment of the correct tax is ultimately the responsibility of the individual taxpayer. NOT the employer.
.

I understand that the employee is ultimately responsible for paying the correct amount of tax but surely they cant be held responsible in any way which would incur penalties etc if it was a genuine mistake and the employee did everything correct on their side.

For example say a person working a PAYE job and then taking on a second PAYE job part time. Rings revenue and organises a revised tax credit cert allocating all cut-offs etc to the main job and none to the part time job. Then the part time employer still applies credits and doesn't apply the top rate of tax so the employee underpays however if they never notice this how can this be the employees fault? Is it even going to be noticed by revenue if the employee does not request a p21?

ceekay74

Ridge Uneven Tail wrote: »

I understand that the employee is ultimately responsible for paying the correct amount of tax but surely they cant be held responsible in any way which would incur penalties etc if it was a genuine mistake and the employee did everything correct on their side.

For example say a person working a PAYE job and then taking on a second PAYE job part time. Rings revenue and organises a revised tax credit cert allocating all cut-offs etc to the main job and none to the part time job. Then the part time employer still applies credits and doesn't apply the top rate of tax so the employee underpays however if they never notice this how can this be the employees fault? Is it even going to be noticed by revenue if the employee does not request a p21?

I don't think any penalties arise for the employee if the correct tax was not deducted by the employer.

barneystinson

Ridge Uneven Tail wrote: »

I understand that the employee is ultimately responsible for paying the correct amount of tax but surely they cant be held responsible in any way which would incur penalties etc if it was a genuine mistake and the employee did everything correct on their side.

For example say a person working a PAYE job and then taking on a second PAYE job part time. Rings revenue and organises a revised tax credit cert allocating all cut-offs etc to the main job and none to the part time job. Then the part time employer still applies credits and doesn't apply the top rate of tax so the employee underpays however if they never notice this how can this be the employees fault? Is it even going to be noticed by revenue if the employee does not request a p21?

Ending up paying the same amount of tax that you always should have, isn't in any way a penalty...

Arbiter of Good Taste

jahalpin wrote: »

This is totally wrong. The employer deducts the tax at source as an agent of the Revenue and is liable for paying this over to the Revenue. Once the money has been deducted at source the employees liability is satisfied

This can be proven in cases of liquidations where the Revenue are priority creditors due to the fact that PAYE/PRSI/USC and VAT have been collected by the company and are being held in trust for the Revenue, the Revenue cannot try to claim from former employees of the company if the company fails to pay its obligations

The employer is liable as withholding agent. So if they get it wrong, then Revenue will come back to the employer. Then the employer is fully entitled to be compensated by the employee, whose tax liability it is in the first place.

Just because the employer gets it wrong, doesn't mean the employee is off the hook for the tax.

The OP is lucky because the company effectively paid the tax for him/her.

Arbiter of Good Taste

Arbiter of Good Taste wrote: »

The OP is lucky because the company effectively paid the tax for him/her.

But if the op agreed a net amount of pay are the company not basically agreeing to set the employees gross pay high enough that he gets the agreed net pay.

Its madness on behalf of the employer but if they agree a net rate and the employee is paying tax on the income at the higher rate then the employer must pay them a high enough gross to account for that.

In the op's case they obviously didn't set his gross pay high enough to take into account how much tax he pays so it was their problem to make up the difference.