Checking your tax credit certificate is a worthwhile exercise – you might even find you are due a refund

Hands up if you read your tax credit certificate every year? What, so few of you? These certificates detail all the credits you will be entitled to over the course of the year, but despite the important information it contains, most of us simply file it away, with the intention of reading it “later on”.

While that “later on” probably never materialises, given the impact of the austerity budgets over the past five years, as well as cuts in salaries, it really is worth taking time to make some sense of it. After all, you might just find that the Revenue Commissioners have made a mistake and you are due a tax refund. Now wouldn’t that be a good start to the new year?

Until 2009, the Revenue automatically issued a tax credit certificate to each PAYE taxpayer, but no longer does so. According to chairman Josephine Feehily, the Revenue stopped this “not only because it was costing money but our testing of it proved it was ineffective and that only a direct communication with somebody works. A bulk issue to the entire working population resulted in most of the certificates either going in the bin or being put on the shelf.” Sound familiar?

Well you can still view your certificate online on PAYE Anytime, or by requesting a copy via telephone or SMS. But it’s only worthwhile if you take the time to read it and check if you’re receiving all your tax credits.

Tax credits are important because they are one of the few ways of reducing your overall tax bill, so it’s worthwhile to make sure you claim for all relevant credits.

First up is your personal tax credit, which has fallen by about 10 per cent since 2008. Every individual is entitled to this, and it is available at a rate of €1,650 for a single person or €3,300 for a married couple.

If you are a PAYE worker, then you can also claim a PAYE tax credit, again of €1,650, down from €1,830 in 2008.

While these are the two main types of credit available, there are others which you might need to check that you are claiming for.

If you have recently become a stay-at-home parent for example, you might now be entitled to a credit if you earn less than €5,080.

“If someone is in that situation, they might be entitled to a home carer tax credit (to a maximum of €810), so they should check whether that appears on it,” advises Deirdre Daly, a tax manager at the Irish Tax Institute.

Similarly, if you recently turned 65 check to see if you are getting your age tax credit (€245 single/€490 couple).

Other tax credits that might apply include the blind person’s tax credit (€1,650 single); incapacitated child credit (€3,300); and dependent relative (€70).

Other credits, such as rent-a-room relief or medical expenses, typically don’t show up on this form, but that doesn’t mean you should forget to claim them. To do this, Daly recommends logging onto the Revenue’s PAYE Anytime facility, where you can apply for these reliefs if you are not self-employed.

Tax credits

The next section details by how much your tax credits, or the amount that can be taxed at the lower rate, might be reduced either to reflect payment of social protection benefits, or previous underpayment of tax. If, for example, the Revenue discovered that you underpaid tax by €800 last year, then you might expect them to adjust your credits by €400 this year and next, in order to recoup the money.

In 2012, the Revenue completed almost 30,000 PAYE investigations, which yielded €23 million – but this was due to the introduction of a new risk system on a phased basis, so you might expect a higher number next year.

If you do see that your tax credits are reduced this year, McGibney recommends you contact the Revenue to discover the extent of the underpayment.

The next part is called your “Tax Rate Bands” or in other words, the amount you can earn each year at the lower (currently 20 per cent) tax rate. Anything above this amount is taxed at the higher rate (currently 41 per cent).

When it comes to standard rate bands, a single person can now earn up to €32,800, at the lower rate of 20 per cent. This has fallen from €36,400 back in 2010. Anything above this will be taxed at 41 per cent, unless you’re a married/civil partnership couple with one income, whereby a standard rate cut-off point of €41,800 applies (down from €45,400 in 2010). For married/civil partnership couples with two incomes, the band is €65,600, down from €72,800 in 2010, while the head of a one parent family can earn up to €36,800 at the lower rate.

Remember, exemption limits also apply, so if you’re over 65, you can earn up to €18,000 tax free, or €36,000, for those who are married or in a civil partnership.

For McGibney, the tax bands can be the “most difficult thing to get your head around”.

Changed earnings

“If you’re a person whose earnings are changing, it’s important to keep the tax band situation under review, particularly if you’re married and separately assessed,” he advises.

Take the example of a couple who, during the boom years, were earning €85,000 in total. Then, one spouse’s income was halved to €17,500 – but they forget to notify the Revenue that they wanted to be jointly assessed.

This could be a costly omission, because it means that the first spouse will now be taxed at the full rate of 41 per cent on €17,200 of their €50,000 salary. If they had been jointly assessed, the higher tax rate would only have applied to €8,200 of income (based on cut-off point of €41,800 for a couple). So a substantial difference, and one worth keeping on top of.

In general, McGibney advises couples to opt for a joint assessment.

“Ensure, to the maximum extent possible, that you’re jointly assessed for tax reasons, unless there is a compelling reason not to do so,” he says, adding that you must notify the Revenue of this intention.

The Universal Social Charge section shows at which rates, and at which bands, the charge is levied on your income.

Finally, the last section on your certificate shows how your tax credits and bands should be allocated. If you’re a PAYE employee, it’s worthwhile to make sure that your employer is applying what the Revenue thinks it is.

“Cross-check your payslip and make sure they’ve been applied correctly,” advises Daly.

McGibney agrees. “Look at your final payslip for 2012, because the main tax credits haven’t changed.

“If you compare your final year tax credit against the first weekly or monthly allocation for 2013, and against your tax credit certificate for 2013, all those three should match. If they don’t, you are probably overpaying tax,” he says.

Of course, they could also show that you have been underpaying tax, but perhaps it’s better to be aware of that situation, than to let your bill with the Revenue mount up.

How to get your tax certificate

If you haven’t yet received your tax cert you can request it by:

Registering for PAYE “Anytime” where there is a facility to view and print your certificate

Texting your PPSN and the word ‘cert’ to 51829. For example, if your PPS number is 1234567A, text: 1234567A CERT to 51829

Use Revenue's lo-call phone service – find the number for your area on iti.ms/VVnHZC