Illness benefit - Have I overpaid tax?

Monife

Hi all,

I was extremely disappointed to find I paid an extra €120 in PAYE this month, the payroll right before Christmas

Our Finance Section said it was due to illness benefit I received for 5 weeks at the start of the year. I recently got a new tax credit cert which reduced my tax credits from 3,420 to 3,257 as a result of the illness benefit.

They said as my credits have changed, I pay 11/12 of the reduction in tax credits this month and 1/12 next month. Is this correct?

I am wondering why I even have to pay extra tax at all?

My work pays sick pay so I already paid tax on my wages while I was sick.

Any help or clarification would be much appreciated.

Stheno

Illness benefit is subject to tax, so that sounds correct to me.

CIARAN_BOYLE

Monife wrote: »

Hi all,

I was extremely disappointed to find I paid an extra €120 in PAYE this month, the payroll right before Christmas

Our Finance Section said it was due to illness benefit I received for 5 weeks at the start of the year. I recently got a new tax credit cert which reduced my tax credits from 3,420 to 3,257 as a result of the illness benefit.

They said as my credits have changed, I pay 11/12 of the reduction in tax credits this month and 1/12 next month. Is this correct?

I am wondering why I even have to pay extra tax at all?

My work pays sick pay so I already paid tax on my wages while I was sick.

Any help or clarification would be much appreciated.

You received 815 illness benefit from social welfare. You paid no tax on this therefore tax credits were used so you didnt have to pay tax on this.

Your tax credits for the year appropiate to your employment have been reduced.

Therefore on a cumulative basis 11/12s of this reduction was due jn November and 1/12 in December.

Any questions?

Monife

CIARAN_BOYLE wrote: »

You received 815 illness benefit from social welfare. You paid no tax on this therefore tax credits were used so you didnt have to pay tax on this.

Your tax credits for the year appropiate to your employment have been reduced.

Therefore on a cumulative basis 11/12s of this reduction was due jn November and 1/12 in December.

Any questions?

Thanks. Yes, just wondering why I had to pay tax on 20% of wages and on illness benefit. Surely my wages during sick leave should have been reduced to the amount of illness benefit and then I pay tax on the total amount, rather than paying 20% on full wages and 20% on illness benefit amount?

CIARAN_BOYLE

Monife wrote: »

Thanks. Yes, just wondering why I had to pay tax on 20% of wages and on illness benefit. Surely my wages during sick leave should have been reduced to the amount of illness benefit and then I pay tax on the total amount, rather than paying 20% on full wages and 20% on illness benefit amount?

Did you do that? Was your wages reduced and did you pay tax on the illness benefit? You tell us. It can happen like that. Its not the usual way of doing things but it can happen.

The reason its not the usual way of doing things is that it requires instant communication between social welfare and your employer.

Social welfare notifies employers in post, too much chance of post coming late.

Monife

CIARAN_BOYLE wrote: »

Did you do that? Was your wages reduced and did you pay tax on the illness benefit? You tell us. It can happen like that. Its not the usual way of doing things but it can happen.

The reason its not the usual way of doing things is that it requires instant communication between social welfare and your employer.

Social welfare notifies employers in post, too much chance of post coming late.

No, that didn't happen. Does that mean if I do a P21 at the end of the year, I would be due a refund?

Stheno

Monife wrote: »

No, that didn't happen. Does that mean if I do a P21 at the end of the year, I would be due a refund?

No. Basically what seems to have happened here is that while you were off sick, you were paid as normal by your company and paid normal tax on your salary.

But as you also got the extra income from Illness Benefit, you should have paid tax on that, which didn't happen. The Revenue and the DSP talk to each other so when the Revenue learned you had gotten that extra benefit on which you did not pay tax, they adjusted your tax credits to ensure that you were all square at the end of the year.

Monife

Stheno wrote: »

No. Basically what seems to have happened here is that while you were off sick, you were paid as normal by your company and paid normal tax on your salary.

But as you also got the extra income from Illness Benefit, you should have paid tax on that, which didn't happen. The Revenue and the DSP talk to each other so when the Revenue learned you had gotten that extra benefit on which you did not pay tax, they adjusted your tax credits to ensure that you were all square at the end of the year.

But I didn't get that extra income, my employer did... So essentially I paid tax on something I didn't receive?

Stheno

Monife wrote: »

But I didn't get that extra income, my employer did... So essentially I paid tax on something I didn't receive?

Were you not sent checks by the DSP for illness benefit, or is it a case that you were sent them and had to give them to your employer?

Monife

Stheno wrote: »

Were you not sent checks by the DSP for illness benefit, or is it a case that you were sent them and had to give them to your employer?

No. I work for the Public Service. I just had to get my illness benefit slip signed by the doctor each week and posted them to work, they did the rest.

Stheno

Monife wrote: »

No. I work for the Public Service. I just had to get my illness benefit slip signed by the doctor each week and posted them to work, they did the rest.

By illness benefit slip do you mean the deparment of social welfare form? It's a couple of a4 pages long and is supposed to be sent to the dsp?

Sounds like there might be a mix up here. Did you get any additional pay/checks during the five weeks you were off?

allthedoyles

Some years a ago a friend in the HSE asked me to check her P60 / Illness Benefit .

She had been tax twice .- The HSE had included her Illness Benefit in her gross pay on P60 and when she requested a balancing statement , the tax office included the Illness Benefit separate .

She had to get a statement of actual wages earned from HSE and this proved that Illness Benefit had been included twice in balancing statement.

Now you have not got to this point yet ,but it is possible that you are now been double taxed , depending on what way the Benefit was treated by wages office when you out sick.

Monife

Stheno wrote: »

By illness benefit slip do you mean the deparment of social welfare form? It's a couple of a4 pages long and is supposed to be sent to the dsp?

Sounds like there might be a mix up here. Did you get any additional pay/checks during the five weeks you were off?

I filled out the long form initially and gave it to my employer, don't know what they did with it after that. Then I had to get half page slips signed by the doctor each week, they just signed them and posted them to me and then I signed them and posted them to work.

I was paid my full wages while I was off and no reference was made about illness benefit on those payslips.

Last month I received a kind of statement thing from DSP stating the amount of illness benefit I claimed in February. I gave it to my employer. Last month, my wages were reduced by the total illness benefit amount and the illness benefit was "added in". I paid no USC or PRSI on the benefit but I paid tax, as if it was my full wages. This month, my tax credits were reduced by 20% of the amount of illness benefit I received.

Was I double taxed?

Edited to add that no, I did not receive any extra pay while I was sick just my normal wages.

Stheno

Monife wrote: »

I filled out the long form initially and gave it to my employer, don't know what they did with it after that. Then I had to get half page slips signed by the doctor each week, they just signed them and posted them to me and then I signed them and posted them to work.

I was paid my full wages while I was off and no reference was made about illness benefit on those payslips.

Last month I received a kind of statement thing from DSP stating the amount of illness benefit I claimed in February. I gave it to my employer. Last month, my wages were reduced by the total illness benefit amount and the illness benefit was "added in". I paid no USC or PRSI on the benefit but I paid tax, as if it was my full wages. This month, my tax credits were reduced by 20% of the amount of illness benefit I received.

Was I double taxed?

NO idea tbh, it all sounds quite unusual from experiences I've had with illness benefit, your payroll team may be able to help? Or someone here who works in the public sector.

Just Retired

Hi There
Firstly Check with your Employer what the rules are when claiming Illness Benefit.You should be informed of what these are. In some cases Employers will pay you your full salary for a set period they have set out i.e. Six or Three Months etc. If they operate this method then in all cases you will be required to surrender the Illness benefit payment.The Illness claim form asks you to tick which ever method you want to use i.e.Credit transfer to their bank account or cheque. If you do not get paid by your employer,then you get the benefit directly.Lets assume you surrender the payment, then your employer should run the benefit through the Payroll system, e.g. Employer Salary €2,500.00c,Illness Benefit €752.00c,Per Month so the adjusted employer salary is €1,748.00c,and since Tax is paid on illness benefit the total amount liable to tax is still €2,500.00c, and NOT €2,500.00c Plus €752.00c. If the Benefit was not run through payroll,and you surrendered your benefit to them,then you run into the situation you are in,i.e. being taxed on Full salary and benefit with no advantage to you, as you will not receive the residual part of Illness Benefit. You will also know that USC & PRSI are not applied to State Benefits, so These deductions will only apply to your Salary,Less Illness Benefit, and since the Employer Pays PRSI on your normal salary they lose out as well since they should only pay PRSI on your salary less illness benefit!!.As it stands the revenue pick up on this and adjust SRCOP/Tax credit accordingaly to recover taxable amount on the illness benefit you received.I had a very similar experience to you and I recovered the unecessary overpayments.

Monife

Just Retired wrote: »

Hi There
Firstly Check with your Employer what the rules are when claiming Illness Benefit.You should be informed of what these are. In some cases Employers will pay you your full salary for a set period they have set out i.e. Six or Three Months etc. If they operate this method then in all cases you will be required to surrender the Illness benefit payment.The Illness claim form asks you to tick which ever method you want to use i.e.Credit transfer to their bank account or cheque. If you do not get paid by your employer,then you get the benefit directly.Lets assume you surrender the payment, then your employer should run the benefit through the Payroll system, e.g. Employer Salary €2,500.00c,Illness Benefit €752.00c,Per Month so the adjusted employer salary is €1,748.00c,and since Tax is paid on illness benefit the total amount liable to tax is still €2,500.00c, and NOT €2,500.00c Plus €752.00c. If the Benefit was not run through payroll,and you surrendered your benefit to them,then you run into the situation you are in,i.e. being taxed on Full salary and benefit with no advantage to you, as you will not receive the residual part of Illness Benefit. You will also know that USC & PRSI are not applied to State Benefits, so These deductions will only apply to your Salary,Less Illness Benefit, and since the Employer Pays PRSI on your normal salary they lose out as well since they should only pay PRSI on your salary less illness benefit!!.As it stands the revenue pick up on this and adjust SRCOP/Tax credit accordingaly to recover taxable amount on the illness benefit you received.I had a very similar experience to you and I recovered the unecessary overpayments.

Did you get the money back and if so, how?

Just Retired

Monife

Yes I did get the Money back,If you claimed the illness benefit in the current tax year,2015,then you can explain to your payroll department to have the final salary of the year and illness benefit entered on their system.The run-off will give your correct Tax/USC/Deductions etc. I do not know if you are paid on a Weekly/Forthnight/Monthly basis.In my case it was outside the relevant Tax Year.I then got my employer to declare that the Illness benefit should have been run through the payroll system.The furnished me with a declaration,Signed and dated for that Purpose. I visited the Tax office and I submitted this declaration, they understood it and I got an amended P21 for that year,which included the correct refund.Remember you can only go back 4 Years to claim any refund you may be entitled to.If you are too late for this year, then you will have to approach your H.R./Payroll Admin. section. Do you get paid on a Monthly/Weekly/Forthnightly Basis?

Monife

Just Retired wrote: »

Monife

Yes I did get the Money back,If you claimed the illness benefit in the current tax year,2015,then you can explain to your payroll department to have the final salary of the year and illness benefit entered on their system.The run-off will give your correct Tax/USC/Deductions etc. I do not know if you are paid on a Weekly/Forthnight/Monthly basis.In my case it was outside the relevant Tax Year.I then got my employer to declare that the Illness benefit should have been run through the payroll system.The furnished me with a declaration,Signed and dated for that Purpose. I visited the Tax office and I submitted this declaration, they understood it and I got an amended P21 for that year,which included the correct refund.Remember you can only go back 4 Years to claim any refund you may be entitled to.If you are too late for this year, then you will have to approach your H.R./Payroll Admin. section. Do you get paid on a Monthly/Weekly/Forthnightly Basis?

Monthly. And I received 5 weeks illness benefit in February of this year.

screamer

Monife wrote: »

Monthly. And I received 5 weeks illness benefit in February of this year.

Did you get your monthly pay from work in February and also 5 weeks of illness benefit paid out to you from the social welfare to your bank account or by cheque? If you did then it's correct for it to be taxed. If you just for your regular (not reduced) wages from work and no payment directly to you from social welfare then the tax deducted in the month by your employer should have covered the tax due and this is not correct to adjust your tax credits.

Monife

screamer wrote: »

Did you get your monthly pay from work in February and also 5 weeks of illness benefit paid out to you from the social welfare to your bank account or by cheque? If you did then it's correct for it to be taxed. If you just for your regular (not reduced) wages from work and no payment directly to you from social welfare then the tax deducted in the month by your employer should have covered the tax due and this is not correct to adjust your tax credits.

The latter. I received no money from the Social Welfare, it must have gone directly to my employer. I just received my wages as normal.

Will a P21 at the end of the year right this situation or do I have to do something else? Thanks

allthedoyles

Revenue need to get to grips with Illness Benefit because its a mess and Revenue know this.

Some employers reduce tax credits , others keep the cheques , others reduce gross pay , others add the amount to gross pay etc

If an Illness Benefit cheque is made payable to you, then you cash / lodge it . - Did you sign the back of cheque for your employer.?

Monife

allthedoyles wrote: »

Revenue need to get to grips with Illness Benefit because its a mess and Revenue know this.

Some employers reduce tax credits , others keep the cheques , others reduce gross pay , others add the amount to gross pay etc

If an Illness Benefit cheque is made payable to you, then you cash / lodge it . - Did you sign the back of cheque for your employer.?

I never received any cheques. I filled a form, gave it to my employer and that was that.

screamer

Monife wrote: »

The latter. I received no money from the Social Welfare, it must have gone directly to my employer. I just received my wages as normal.

Will a P21 at the end of the year right this situation or do I have to do something else? Thanks

A p21 should fix it you're owed the tax back.

Just Retired

Hi There Monife
You state that you received Illness benefit for 5 Weeks in February, lets assume it is 5 x €188.00c =€940.00c of Benefit. You give over this to your Employer,and you do not gain by this at all. So your employer pays you your normal Salary, so Let's Assume it to be €2,500.00c per Month, what has to happen is that the amount of I.B. is entered on their Payroll system,and the result is the following and must show on your Payslip, Normal Salary:- €1,560.00c
plus Illness Benefit €940.00c Total Liable to Tax €2,500.00c as per normal salary, AND NOT €3,400.00c which happened in your case, although your adjusted SRCOP/Tax Credits Cert.collects the assumed extra tax on the benefit, and you do not gain by the residual amount of illness benefit after deductions.You will have to approach your payroll dept.and if your are in time for December Payroll run off insist that the I.B. is run through the system,do not worry since your are paid your full salary,their system will recognise that. If you hit a brick wall or stubborness, ask this question:- How do I recover the USC that was NOT DUE on the illness benefit?,i.e.USC should only have been paid On the amt.of €1,560.00c.The same applies for PRSI.If there is no progress then ask them this How does the employer recover the EMPLOYER'S portion of PRSI if the illness benefit was not run through the payroll system?,again the Employers' portion of PRSI only applies to the €1,560.00c amount of salary, I assume you are Class A contributor and this rate is 4% Employer's rate is circa 10.75%.Of course when the I.B. is ran through the system it then calculates this correctly for Tax/PRSI/USC so you will have all in order. If their is no satisfaction here, try your union rep.or if not in one, you could approach a solicitor dealing in employment law, I know they cost money but use only as a last resort etc.