Thousands at risk of paying income tax on the double, expert warns
Published 30/04/2015 | 02:30
THOUSANDS of people are paying income tax on the double because of the confusing way one of the main tax forms is designed, a leading tax practitioner claims.
Revenue has admitted there is potential for double charging and said it plans to change the way its forms and its online systems work.
The issue affects up to 100,000 people who received illness benefit in the last three years, according to tax expert John O'Connor of Red Oak Tax Refunds.
When they go online to update their tax affairs through PAYE Anytime, the system tells them to give their total earnings by pointing them to one of the sections on the P60 tax form.
Close to one million workers have registered for the PAYE Anytime system, which allows them to claim refunds, get tax credits and notify the tax authorities of changes to their employment details.
Mr O'Connor said the PAYE Anytime automatically includes any illness benefit a taxpayer is getting.
However, anyone using PAYE Anytime is asked to enter a specific total earnings figure on the system from their P60 that includes any illness benefit they have received.
"The illness benefit figure is already on an individual's tax record in PAYE Anytime as a separate income.
"This means that if the P60 figure is used the individual will be taxed twice on their illness benefit income," Mr O'Connor said. The tax expert said this put 100,000 people at risk of being taxed on the double.
His company had come across a number of instances where people ended up paying tax twice on their illness benefits.
Illness benefit is a payment made to people who are unable to work and have made sufficient eligible PRSI (pay related social insurance) contributions.
In 2013 alone, 59,000 people received Illness benefit, according to published figures.
Mr O'Connor said: "Over the course of the three years -2012 through 2014 - we estimate 100,000 taxpayers have been placed at risk of being double taxed due to this massive Revenue error."
He said errors like this are particularly difficult for ordinary taxpayers to spot.
"Not many taxpayers are familiar with the specific calculations of their taxes, so this illustrates how the most trusted of tax documents - the P60 - can actually lead you to make a mistake on your own tax record resulting in a higher tax bill."
A spokeswoman for the Revenue Commissioners insisted the tax office checks any income details submitted by taxpayers against the employer P35 form, and corrects any inaccuracies.
But she admitted that "there is potential for tax on illness benefit to be over-charged".
And there would be changes made in Revenue procedures, she added.
"Revenue will be modifying the guidance for future years to eliminate the potential for the double-court mentioned," the spokeswoman added.