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Odd increase in Net wages after rejoing work foollowing Covid PUP

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  • 20-05-2020 6:03pm
    #1
    NewRed2
    Closed Accounts Posts: 999 ✭✭✭


    Hi,
    Bit of an odd question but My wages for this week have more than doubled. Our accountant says its due to seven weeks of being on the PUP payment and so my tax allowance was not used over those 7 weeks and now due it back so she says it's actually correct.
    But we're talking about around 800 quid more than I should usually get. So my worry now is if I will end up paying this back later in the year etc and would rather be expecting the worst if that makes sense.
    Does any of this sound correct? So basically I was earning 650 net per week then took PUP for 7 weeks meaning a reduction in my weekly income of circa 2100 euro so then went back to work this week to discover ROS calculations saying I'm to get paid an extra 800 quid or something this week.
    Rang accountant to check and she's insisting its correct and due to the tax allowance etc that I didn't use during the past 7 weeks?
    It just sounds too good to be true to me, never ends well with Revenue so I wanted to ask here to be sure, thanks :)


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    #2
    L1011
    Moderators, Business & Finance Moderators, Motoring & Transport Moderators, Society & Culture Moderators Posts: 67,615 Mod ✭✭✭✭L1011


    Reduction in weekly of 2100 (implying you were on significantly >100k) or reduction in monthly? And do you know if your employer is claiming the wage subsidy scheme for you, as this impacts tax calculations (and is reclaimable later)


    If you were receiving just the 350/week you would have tax credits and standard rate cut-off unused from that time period which could be what's happening here.


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    #3
    NewRed2
    Closed Accounts Posts: 999 ✭✭✭NewRed2


    Hi L1011, thanks for the reply.
    Sorry, I wish I was on 100k :) I meant in total over 7 weeks of PUP I had a total reduction of 2100 (650-350 = 300 x 7 weeks = 2100)

    The figure, having re-checked of my unexpected increase in wages this week is actually closer to 1k

    We didn't use wage subsidy scheme at all, just the emergency 350 payment as business closed entirely for 7 weeks.

    So is this actually correct? ROS says it is and accountant says it is. I'm just useless at taxation and my worry was that its an error or something I will have to pay back later on so I'm nervous about spending any of it when it could have to be repaid at a later date....
    thanks again :)


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    #4
    L1011
    Moderators, Business & Finance Moderators, Motoring & Transport Moderators, Society & Culture Moderators Posts: 67,615 Mod ✭✭✭✭L1011


    Basically when you were on 350 your standard rate cutoff was ~670, so there's headroom there as well as the normal credits. That's probably been given back to you in one go.


  • Options
    #5
    Danniilong
    Registered Users Posts: 51 ✭✭Danniilong


    My husband was told by his enployer that this will happen but he will receive a tax bill at the end of the year to re-coup. She made him create a 'my enquiry' on revenue to reset back to week 1 payment in order to avoid.


  • Options
    #6
    Turkish1
    Registered Users Posts: 273 ✭✭Turkish1


    NewRed2 wrote: »
    Hi L1011, thanks for the reply.
    Sorry, I wish I was on 100k :) I meant in total over 7 weeks of PUP I had a total reduction of 2100 (650-350 = 300 x 7 weeks = 2100)

    The figure, having re-checked of my unexpected increase in wages this week is actually closer to 1k

    We didn't use wage subsidy scheme at all, just the emergency 350 payment as business closed entirely for 7 weeks.

    So is this actually correct? ROS says it is and accountant says it is. I'm just useless at taxation and my worry was that its an error or something I will have to pay back later on so I'm nervous about spending any of it when it could have to be repaid at a later date....
    thanks again :)

    First thought - are you sure you aren't on the wage subsidy scheme since returning to work? This (no tax at this point on the subsidy amount) + unused tax credits and lower PRSI could result in massive difference week on week.

    Other thoughts - if you are certain you are not on the wage subsidy scheme.

    Your tax credits would not have been utilised during the 7 weeks you were on the unemployment payment of€350 per week. You would have built up usused credits (say approx 3500/52*7 = €471 of credits) that would be used against your first taxable pay after returning to work. So that is nearly €500 straight away back in your pocket.

    You could have higher credits depending on your circumstances which might justify a higher tax back number.

    On top of this, it sounds like you would be on the top rate of tax normally (if that is €650net per week). This would mean that it is likely that you may only be paying 20% on your full tax this week v 40% on some of it pre 7weeks - another increse in net pay through lower tax.

    Add that your USC band might be a touch lower aswell and not too much of a stretch to see that significant of an increase month on month.


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    #7
    Turkish1
    Registered Users Posts: 273 ✭✭Turkish1


    Danniilong wrote: »
    My husband was told by his enployer that this will happen but he will receive a tax bill at the end of the year to re-coup. She made him create a 'my enquiry' on revenue to reset back to week 1 payment in order to avoid.

    Just an FYI - Going onto week 1 will help mitigate some of that tax liability you will be left with at the end of the year however, you will likely still end up with a liability - albeit lower than if you stayed on the cumulative tax basis.

    Worth double checking just so you don't end up with a surprise at the end of the year.


  • Options
    #8
    Danniilong
    Registered Users Posts: 51 ✭✭Danniilong


    Turkish1 wrote: »
    Just an FYI - Going onto week 1 will help mitigate some of that tax liability you will be left with at the end of the year however, you will likely still end up with a liability - albeit lower than if you stayed on the cumulative tax basis.

    Worth double checking just so you don't end up with a surprise at the end of the year.

    Thanks.
    So will he likely get no refund going back to week 1 (not too sure what this means) and then still get a bill (jusy a smaller amount)?


  • Options
    #9
    Wesser
    Registered Users Posts: 1,813 ✭✭✭Wesser


    Ring revenue and ask to go onto a week 1 month 1 basis. I dont know what it neans but all i know is it stops you underpaying tax.


  • Options
    #10
    Victor
    Registered Users Posts: 78,241 ✭✭✭✭Victor


    Effectively, you weren't earning (for PAYE purpose) for the last 7 weeks and your tax credits built up.

    Set that money aside, e.g. use a separate account.

    Note that this is a one-off, you won't be getting it next week / month again.


  • Options
    #11
    Wanderer19
    Registered Users Posts: 258 ✭✭Wanderer19


    NewRed2 wrote: »
    Hi,
    Bit of an odd question but My wages for this week have more than doubled. Our accountant says its due to seven weeks of being on the PUP payment and so my tax allowance was not used over those 7 weeks and now due it back so she says it's actually correct.
    But we're talking about around 800 quid more than I should usually get. So my worry now is if I will end up paying this back later in the year etc and would rather be expecting the worst if that makes sense.
    Does any of this sound correct? So basically I was earning 650 net per week then took PUP for 7 weeks meaning a reduction in my weekly income of circa 2100 euro so then went back to work this week to discover ROS calculations saying I'm to get paid an extra 800 quid or something this week.
    Rang accountant to check and she's insisting its correct and due to the tax allowance etc that I didn't use during the past 7 weeks?
    It just sounds too good to be true to me, never ends well with Revenue so I wanted to ask here to be sure, thanks :)
    The PUP payment is taxable.
    I would say that the refund you're getting is related to tax you paid prior to being laid off, especially if you paid at the higher rate. Without having access to your payslips I couldn't confirm it either way.
    However, I would put that money into a seperate account in the event that revenue came looking for it later in the year.


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    #12
    secman
    Registered Users Posts: 6,226 ✭✭✭secman


    Its correct in real time but as others alluded to as DEASP payments are taxable, your end of year statement will reflect an underpayment of tax, prsi and usc. Revenue will claw this back over 1 or 2 years on a case by case decision and circumstances prevailing.


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    #13
    Victor
    Registered Users Posts: 78,241 ✭✭✭✭Victor


    secman wrote: »
    Its correct in real time but as others alluded to as DEASP payments are taxable
    Note that only some payments are taxable.


  • Options
    #14
    NewRed2
    Closed Accounts Posts: 999 ✭✭✭NewRed2


    Thanks everyone, so it sounds like I'll be paying it all back at end of year so with a tax bill? If I ask to reset to week-1 next week would that mean I can get most of this tax bill paid immediately rather than wait?


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    #15
    NewRed2
    Closed Accounts Posts: 999 ✭✭✭NewRed2


    OK so guess what, I rang Revenue there now and they assured me it's actually correct! He said it's due to a build up of tax credits owed back to me built up over the 7 weeks of being on the PUP.
    Has anyone else found themselves in this same situation who could clarify? it's very strange to be getting so much money back, I was sure they'd tell me it was an error but quite the opposite


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    #16
    Stratvs
    Registered Users Posts: 958 ✭✭✭Stratvs


    NewRed2 wrote: »
    OK so guess what, I rang Revenue there now and they assured me it's actually correct! He said it's due to a build up of tax credits owed back to me built up over the 7 weeks of being on the PUP.
    Has anyone else found themselves in this same situation who could clarify? it's very strange to be getting so much money back, I was sure they'd tell me it was an error but quite the opposite

    The PUP is not (currently) on Revenue's radar as far as tax credits are concerned. So each week you had no earnings your tax credits and standard rate cut-off were available to carry forward. If left on cumulative basis ( all income/credits aggregate over the year ) which Revenue do unless you requested week 1 basis, then you now have only one week's extra income but 7 weeks credits/cut-off. So taking this week as week 21 they're treating you as if you have 21 weeks credits but only 14 weeks income so you end up with a refund now.

    However, the PUP is taxable, just not in real time so unless the tax cert was put on W1 before any refund then a refund such as yours can happen. At the year end the PUP is taxable ( there were rumblings about exempting it like assistance payments but there is nothing official on that ) so it will be included as income after all and the refund you got now will be eroded either totally or in part depending on income for the year.

    Revenue have indicated that they will do reviews in 2021 on 2020 and any underpayments will be collected by reducing tax credits in 2021 or following year(s) depending on amounts.


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    #17
    NewRed2
    Closed Accounts Posts: 999 ✭✭✭NewRed2


    Thanks Stratvs, very well explained, thank you. So I decided not to take the increased wages and contacted Revenue and they immediately switched me to week-1 basis before we submitted the wages officially so its gone through now and I have received the normal wage.
    Can I ask, at end of year now should I end up receiving a tax rebate and at least avoid any tax bills, yes?

    thanks a mill ;)


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    #18
    Wanderer19
    Registered Users Posts: 258 ✭✭Wanderer19


    NewRed2 wrote: »
    OK so guess what, I rang Revenue there now and they assured me it's actually correct! He said it's due to a build up of tax credits owed back to me built up over the 7 weeks of being on the PUP.
    Has anyone else found themselves in this same situation who could clarify? it's very strange to be getting so much money back, I was sure they'd tell me it was an error but quite the opposite
    Did you ask revenue if the PUP was taxable and if it was going to affect your annual income/tax liability?


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    #19
    Victor
    Registered Users Posts: 78,241 ✭✭✭✭Victor


    NewRed2 wrote: »
    Can I ask, at end of year now should I end up receiving a tax rebate and at least avoid any tax bills, yes?

    There may be a modest rebate, as you were earning less for the 7 weeks.


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    #20
    NewRed2
    Closed Accounts Posts: 999 ✭✭✭NewRed2


    Wanderer19 wrote: »
    Did you ask revenue if the PUP was taxable and if it was going to affect your annual income/tax liability?

    I rang them twice, first person I spoke with seemed to think wages and refund were correct and so on..... But I rang back and got a different person and he said there would be a liability at end of tax year etc if I took the original refund wage and he sounded much more on the ball.
    About the PUP, Yes I mentioned the PUP tax situation to the 2nd person and he didn't commit 100% to saying it was taxable in itself but he fairly much implied it would be without wanting to say it, if that makes sense. But yes it certainly sounded like it will be. Basically he strongly hinted that it will be without committing to it.


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    #21
    Stratvs
    Registered Users Posts: 958 ✭✭✭Stratvs


    NewRed2 wrote: »
    Thanks Stratvs, very well explained, thank you. So I decided not to take the increased wages and contacted Revenue and they immediately switched me to week-1 basis before we submitted the wages officially so its gone through now and I have received the normal wage.
    Can I ask, at end of year now should I end up receiving a tax rebate and at least avoid any tax bills, yes?

    thanks a mill ;)

    That was fast sorted in fairness, part of the efficiency of PAYE modernisation and real time reporting. Your 7 weeks credits/cutoff are now parked as it were and at year end when the PUP is taken into account the tax credits should cover that. You will have a small Amount of usc cutoff not used as the PUP is not liable to usc so there may be a modest refund but at worst you should be close to even.


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    #22
    Wanderer19
    Registered Users Posts: 258 ✭✭Wanderer19


    Stratvs wrote: »
    That was fast sorted in fairness, part of the efficiency of PAYE modernisation and real time reporting. Your 7 weeks credits/cutoff are now parked as it were and at year end when the PUP is taken into account the tax credits should cover that. You will have a small Amount of usc cutoff not used as the PUP is not liable to usc so there may be a modest refund but at worst you should be close to even.
    If it was real time reporting the PuP would be accounted for now, and the op wouldn't be on here looking for clarification.
    The fact that revenue staff can't give a straight answer as to whether the payment is taxable is worrying, and I have concerns over the information they are giving out. (And not just because of the current issues).


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