Were you unemployed, working part-time and/or received a redundancy payment during 2008? Don’t delay, prepare and file your 2008 tax return now, as you may be due a refund of income tax.
If you were not working for the full year i.e. from January to December 2008, you may be due a refund of income tax for that year.
When calculating the amount of tax payable on the salary you receive from your employer, your tax credits and standard rate band are apportioned evenly throughout the year. So, if your pay period is one month, you will receive 1/12th of your tax credits and standard rate band each month. If you were:
• Out of work due to an illness for a few months; • Became unemployed; or • Returned to Ireland after a period abroad, or left Ireland to go abroad; you may have overpaid tax and be entitled to a refund in respect of the 2008 tax year.
By filing your 2008 tax return early, you can determine how much you are due back and receive a refund as soon as possible.
Paid tax on your redundancy payment? You may be due a refund under ‘Top Slicing Relief’
Top slicing essentially looks at your previous income and the amount of tax paid. The purpose of this relief is to ensure that your redundancy payment is not taxed at a tax rate in excess of your average tax rate for the previous three years.
Example:
• The taxable part of your redundancy payment was €20,000; • Your average rate of tax for the last 3 years is 25%; • You paid tax on your lump sum (after the tax free amounts) at 41% or €8,200.
As your average tax rate is lower, i.e. 25%, you may be due a refund of the difference, which amounts to €3,200.
Again, by filing your return, you can establish if you have paid too much tax on your termination payment and also review if you have received the maximum exemption that you are entitled you.
As outlined above, a ‘top slicing’ claim takes into account your effective tax rate for the previous three years and, therefore, if you had non-PAYE income in those years and have not filed a return, you should do so now so that there is no delay in processing your claim for ‘top slicing relief’.