Can I get a maternity benefit tax refund?
Q. I have just found out I am pregnant with my second child, which is fantastic news! However, there's been a bit of a gap - five years - between this one and my last child, and I just want to know my standing when it comes to maternity benefit. I think there have been some changes over the years. Also, my friend told me something recently about her applying for a tax refund which was due to her as a result of tax she paid on her maternity benefit way back in 2013. She said I should ask to see if I'm owed anything also.
Katie, Galway City
A. Maternity benefit is payable to women on maternity leave from work who are covered by social insurance. From July 1, 2013, maternity benefit was made taxable for all claimants. The collection of tax on maternity benefit differs for both PAYE and self-employed earners.
For PAYE workers, the Department of Social Protection (DSP) will notify Revenue directly to advise of the amount of maternity benefit to be taken into account for income tax purposes. Revenue will then automatically reduce the annual tax credits and standard rate bands to account for the tax payable on the maternity benefit. This will ensure that the tax is collected at source and there is no requirement for the individual in receipt of maternity benefit to declare the income received on a tax return.
If you are self-employed, you will need to declare the details of maternity benefit received on your annual income-tax return.
If you were in receipt of maternity benefit before July 1, 2013, you may be entitled to a tax refund if your maternity benefit was paid to your employer and your employer continued to pay your wage as normal throughout the maternity period. There is a time limit of four years in which you can claim refunds from the Revenue, so if you if you believe you may be due a refund in respect of tax paid on maternity benefit received before July 1, 2013, check it out.
Budget 2014 brought more bad news on the maternity-benefit front. From January 6, 2014, the minimum and maximum rates of maternity benefit were standardised at €230 per week for new applicants. This will result in a reduction of up to €32 per week for all claimants who are in receipt of the higher rate of €262 per week. The change applies to new claimants (from January 6, 2014). Existing claimants are not affected.
The introduction of taxation on maternity benefit in 2013 coupled with the standardisation of €230 per week in 2014 has left many mothers on maternity leave financially much worse off. Over the full 26 weeks of maternity benefit, those due to receive the higher rate will lose €832 in payment and will also be taxed on the income they receive.
Q. I own and live in my home and I have no mortgage on it. Workwise, in my current job things are slowing down and it looks like I will have to move to Dublin to get a new job. In that case, I would have to rent a house in Dublin and rent out my current house. Say I pay €1,000 per month on rent in Dublin and receive €500 per month from my current house, will I have to pay tax on the rental income I receive? I do not have any other rental income. It would seem very unfair if I did as I would be paying out more rent than I am taking in!
A. You pay tax on your rental profit, which is calculated by deducting all tax allowable expenses from your gross rent.
Tax allowable expenses would include mortgage interest, insurance costs, repairs, advertising costs, legal fees for drawing up leases, service charges and accountancy fees relating to the rental income.
There is no deduction allowable for capital expenditure on items like your furniture but there is a capital allowance given for the cost of these items. These costs are written off at a rate of 12.5pc a year of the original cost over eight years.
Paying rent in respect of another property is not an allowable expense and therefore cannot be used to reduce your rental profit. If you were paying rent on the same property then this rental payment would be allowed as an expense.
Q. Can you tell me about doing a tax return online? Is it a simple or detailed process for a couple with one PAYE partner working and myself with a disability payment plus a small amount of rental income? I normally do my return by sending details to an accountant and they submit all to Revenue. But it's a detailed process and costly, as preliminary tax is part of the assessment.
Richard, Tallaght, Dublin
A. As you are in receipt of non-PAYE income from your rental property, it is likely that you will be deemed to be a chargeable person for income tax, and therefore required to file a Form 11 tax return. As a self-assessed taxpayer you would also be required to pay preliminary tax for the following tax year. Depending on the amount of taxable rental income, you may be able to have your non-PAYE income coded onto your tax credit certificate and collected at source, in which case you would not be treated as a self-assessed taxpayer.
As a married individual you will be jointly assessed with your spouse unless you tell the Revenue authorities that you wish to be assessed separately. When you are jointly assessed, both incomes must be declared on the tax return.
Disability payments are taxable sources of income and must be declared, in addition to any other sources of income, such as income from savings deposit interest.
Any tax relief you are entitled to can be claimed via the annual tax return.
A Form 11 tax return must be filed online each year and the individual or their tax agent must be registered with Revenue's Online Service (ROS) so that the return can be submitted online. If you are planning on filing your return yourself online, you should do this sooner rather than later as there a number of steps involved in getting set up on ROS.
Your preliminary tax as well as your tax liabilities can be paid through the ROS system.
A tax return must be filed and payments made no later than October 31 each year. However, if you are filing and paying online through the ROS you can file by an extended deadline of November 12.
As a self-assessed taxpayer, it is your responsibility to ensure that your tax return is correct. If you believe that your taxable income has not been disclosed correctly, or indeed if you feel that you have not correctly claimed your allowable expenses and relief on ROS, then it would be advisable to consult with your tax advisers. Any underpayment of tax to the Revenue can end up being a costly mistake.
Overall, how straightforward you find this process will depend on your level of knowledge of the tax return process and your experience in doing things online.
Email your questions to email@example.com or write to 'Your Questions, The Sunday Independent Business Section, 27-32 Talbot Street, Dublin 1'.
While we will endeavour to place your questions with the most appropriate expert to answer your query, this column is a reader service and is not intended to replace professional advice.
Emma Meehan is tax manager and chartered tax advisor with Taxback.com
Sunday Indo Business