Tax can be overpaid. Most PAYE workers regularly review their Health Insurance cover, shop around for motor and home insurance and love a bargain.…So why is it that a lot of individuals are not reviewing what is most likely the largest outgoing in their house, their TAX BILL?
“Sure, I’m a PAYE worker, my tax is deducted at source”, This is a common response when we advise PAYE employees of the importance of filing an annual tax return with Revenue.
Remember, everybody has an obligation to pay tax, but none of us have an obligation to overpay, yet statistics will show you that over 80% of tax-payers overpay their taxes every year by about €900.
Only those who file an annual Tax Return and claim their entitlements with Revenue Commissioners will receive their portion of the overpaid taxes sitting on Revenue’s balance sheet. Once 4 years have passed, this refund is no longer available and Revenue can use these funds as they wish. Therefore, 2014 is currently the oldest year you can submit a claim for and you have until the 31st December 2018 to do so.
There is still a ‘fear factor’ with Revenue where a lot of individuals are afraid to file a tax return with Revenue in case they end up with a liability. This is very rarely the case, however, if it does happen it is important that such an issue is addressed ASAP, as it could continue to occur going forward. And let me tell you the 4-year time limit mentioned above, does not apply to Revenue.
Why do we overpay tax?
There are usually 3 reasons why individuals overpay their taxes.
1. Payroll Errors – yes, on the most part their salary is calculated correctly on payroll software. However, that software relies entirely on the information inputted by the payroll officer, who in turn relies on information from the employee, the Revenue Commissioners and the employer.
With that much human input involved, you can see how human error could result in an over (or under) payment of Tax, USC or PRSI. It happens!
2. Incorrect Allocation of Allowances – whether you are a married couple or a single person with more than one source of income, you have certain rate bands and credits available to you with regards to Tax and USC.
In order to ensure you do not overpay tax, these allowances should be allocated according to the level of income between spouses and/or different sources of income,
subject to Revenue limits. With many fluctuations, mostly down, on individual ’s earnings over the past number of years, more often than not, where these allowances have not been reviewed, they are not allocated correctly which is resulting in overpaid taxes.
3. Claiming your Allowances, Reliefs & Credits – Although Revenue has come a long way in the services and information they provide online, they are not taking out front page adverts advising your of your entitlements. Revenue put the onus on the individual taxpayer to research, understand and ensure that they are claiming all their entitlements.
Below are just some of the reasons you could be missing out on tax refunds if you are not filing returns, there are many more:
- Health Expenses
- Change in personal circumstances
- Flat Rate Expenses
- Pension and/or Income Protection payment
- College Fees
- Home Renovations
- Dependant Relatives
- Health Insurance
- Medical Card Holders
- Maintenance Payments
The above are simply some of the most popular means of tax refunds. Many more are available. If you would like your employees to know more about their tax refunds, contact us today to learn about our education seminars.
This information has been provided by Damian Wilson of ITAS Accounting.
By Damian Wilson
The above article has been written based on today’s rules and rates and does not constitute advice.