Cents & sensibility: Tax Rebates
Could you be owed money by the taxman? Katie Byrne finds there is relief to be found at the revenue
MILLIONS of Irish employees are overcharged by the taxman because they fail to apply for all their tax rebate entitlements.
With income tax rates creeping upwards, PAYE employees are paying bigger tax bills than ever before. However, instead of inwardly cursing the next time your wage slip lands on your desk, consider how you can reduce your tax bill by claiming the tax credits and reliefs to which you are rightfully entitled.
There are dozens of rebates that taxpayers aren't aware of and, once implemented, they can add up to big savings. According to a survey carried out by the Irish Taxation Institute, 40pc of Irish taxpayers are not claiming the basic tax reliefs due to them. Red Oak, an Irish tax refund service, reclaims an average tax refund of €880 per person.
Even so, much of this money continues to sit in the revenue's coffers. "Some people are suffering from a financial ailment beginning with A for apathy, I for ignorance and L for lack of time," says financial advisor, John Lowe.
Thankfully, there are now options for those who fit into these categories. If time is lacking, or you have an aversion to form filling, consider using a tax refund service such as Red Oak (www.redoaktaxrefunds.ie) or Tax Back (www.taxback.com). They will negotiate with the tax office on your behalf and -- in most cases -- they work on a no foal no fee basis.
"These companies offer an excellent service," continues Lowe. "People are certainly waking up and thinking, 'better in my pocket than the taxman's'." Here are a selection of the tax relief and credits on offer.
Rent relief is available for rent paid for your sole residence only and if you are renting from a private landlord or rental agency, but not if you are renting from your parent or from the local authority. The relief for single people under 55 is paid on a maximum of €2,000 at the standard rate of tax. This is calculated as a tax refund of €400 (20pc of €2,000). Rent relief is doubled for widowed/married people under 55 and quadrupled for widowed/married people over 55.
One-Parent Family Credit
Single parents are entitled to a tax credit of €1,830, as long as the child (under 18 years at the beginning of the tax year or 18 years and receiving full-time education or undergoing a full-time training course for a trade or profession for a minimum of two years) stays with them for at least one night a year. Each parent receives the full tax credit once the child resides with both of them for at least part of the relevant tax year.
Medical Expenses Tax Relief
Most taxpayers fail to claim all of their medical tax relief out of both ignorance and misconceived effort. Ask your medical provider to send you a statement of your account and don't forget health workers such as chiropractors, osteopaths and acupuncturists (so long as they are qualified practitioners).
Medical Insurance Relief
Tax relief for medical insurance premiums are granted at source, ie subscribers pay a reduced premium (80pc of the total amount). This applies when the subscriber pays for medical insurance directly or it is paid by them through their employer. However, if all or part of the medical insurance premium is covered by the employer, tax relief at source will not be allowed. It is up to the individual to notify the Revenue and complete an annual return form. According to Red Oak Tax Refunds, this refund is worth €800 to the typical Irish family.
If you employ a carer on behalf of a family member, you are entitled to a tax relief of €50,000. If two or more of you pay for the care, the relief is divided between you in proportion to the amount each paid. If you pay nursing-home fees on behalf of a family member, you can submit for tax relief on the costs using the Med 1 form at the end of the tax year.
When one of a married couple takes care of a dependant person (a child, a person aged 65 or over or a permanently incapacitated person) who normally resides with them, they are entitled to a tax credit set at a maximum rate of €900. The tax credit is not available to married couples that are taxed as single persons. Neither is the tax credit available to married couples with combined incomes of more than €45,400 in the tax year. The home carer's income must not exceed €5,080. (A reduced tax credit applies where the income is between €5,080 and €6,880). If you have been a home carer in any year from 2006, the benefit can still be claimed. The dependant person you are caring for cannot be a spouse.
Income Levy Refund
Thousands of employees have applied to the Revenue for an income levy refund. Should you join them? Employees are exempt from income levy if their income does not exceed €15,028 per annum, €20,000 if you are aged 65 or over (€40,000 for a married couple). You may be entitled to a refund if you were out of work for a period of the past year or if you were paid irregular bonuses/commission. Also exempt are full medical card holders. If you held a medical card for any period during 2009, then you are entitled to a full refund. It was up to your employer to refund any extra amounts paid at the end of last year. However, if you changed employer during the year, you can claim for a refund from the Revenue. Certain incomes are exempt. For example, if you received a redundancy payment and paid income levy, then you are entitled to a refund. Consult the Revenue website for a full list of exempt incomes.
Service Charges Tax Relief
Most taxpayers are unaware that they can claim back 20pc of the cost of service charges through tax relief. If you pay service/bin charges, you can claim back a maximum of €80 per year, as long as the charges were paid on time in the previous calendar year.
Work Expenses Relief
Flat-rate expense tax credits of up to €1,000 are available to employees in certain employment sectors, such as retail, hospitality, construction and healthcare. Expenses include business travel and certain subsistence costs.
If you earned less than €26,000 in 2009, then you may have overpaid the health levy by up to €1,000. The health levy is charged on a weekly basis, however, some employees may not have worked for the entire year. If you are receiving maternity benefit and it is paid through your employer, tax may have been deducted in error. Maternity benefit is exempt from tax. The overpayment is refundable. If you got married last year, contact the Revenue office to find out if you qualify for a refund subject to year-of-marriage relief.