The key questions on retiree tax demands
Published 07/01/2012 | 05:00
The taxman has said that he will be targeting pensioners on higher incomes after revealing 115,000 retired people are facing tax demands this year. But it has left thousands of pensioners facing uncertainty. Charlie Weston answers some of the most pressing questions
Q I ALWAYS thought social welfare payments, even pensions, were exempt from tax. I am confused.
A You are right to be confused. The child benefit payments from the Department of Social Protection (which used to be called Social Welfare) are not taxed. If a single person loses their job, their dole money is not taxed.
But income tax law does allow for social welfare benefits to be taxed if there is other income.
This means the likes of a contributory old age pension, a widow's or widower's pension and an invalidity pension are taxable if the person has another source of income.
However, if a state pension is a person's only source of income, then they will not pay tax on the pension.
In other words, people receiving a Department of Social Protection pension who also have a second pension or a second source of income may be liable for tax.
Q But is it not the case that if pension income is under a certain amount, you do not have to pay tax?
A True. For people aged over 65 whose total income is less than €18,000 as a single person or €36,000 as a married couple or civil partners, then they are exempt from income tax.
If your total income is greater than this, then you may be liable for tax on the entire amount, according to senior tax manager at Ernst & Young, Catriona Coady.
However, if you are just over the threshold, there is a mechanism in place to limit the amount of tax you have to pay. This is known as marginal relief.
Q What are the chances that there will be an amnesty?
A The chances of an amnesty are extremely slim without special legislation being passed by the Dail.
Revenue does not have the power to forgive any taxes, whether the tax is PAYE, VAT, corporation tax or household charge taxes, according to Aidan Clifford of the Association of Chartered and Certified Accountants.
Q Will the tax people go after me for tax going back a few years?
A Revenue can go back four years to recoup unpaid taxes, according to a spokeswoman.
Surcharges can be imposed for failing to file a tax return, and interest and penalties can be imposed for failing to pay tax in the past.
Revenue yesterday insisted the vast majority of the 115,000 who have underpaid tax will not owe any additional tax.
But officials will probe the tax affairs of those who have income of more than €50,000, once the state pension amount is excluded.
The officials pointed out that some 2,500 people have been identified who have income of more than €50,000, excluding the state pension.
The tax officials did not know these people were getting a state pension.
These people will mostly have to settle with Revenue. But if there is evidence of serious tax evasion, there are likely to be penalties and interest levied.
Q Where can I get more information?
A Revenue's 1890 telephone service will be available today from 9.30am until 4.30pm to deal with queries in relation to tax on the Department of Social Protection pensions.
Pensioners with tax and social welfare concerns on foot of recent communications from the Revenue Commissioners should drop in to their local Citizens Information Service, call CIPS on 076 107 4000 or log on to citizensinformation.ie.