This is an “Inspection Copy”. Whilst some text has been ...payroll-book.com/files/Payroll-Textbook-Inspection-Copy_1.pdf · This is an “Inspection Copy”. ... Sample Revenue

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This is an “Inspection Copy”. Whilst some text has been edited or removed this does not alter the format and overall content of the published version of the book. Contents QQI Payroll Component Details (Extract)..................................................................3 Chapter 1……..Payroll Terminology and Concepts .................................................4 Quiz Explanation of Terms Calculating Gross Pay Questions on Gross Pay Chapter 2……..The PAYE System............................................................................10 Introduction The Tax Credit and Universal Social Charge Certificate Tax rates and bands Questions on tax bands Standard Rate Cut-Of Point( SRCOP) Tax Credits and calculating tax credits Questions on calculating tax credits PRSI - Information and calculation Questions on calculating PRSI contributions Universal Social Charge (USC) Chapter 3……..The Cumulative Tax System ..................…..……….…………….....26 Introduction Cumulative Tax Deduction Card (TDC) Questions on cumulative tax (First Set) Unpaid Leave Questions on cumulative tax (Second Set) Holiday Pay Questions on cumulative tax (Third Set) Monthly payroll Questions on cumulative tax (Fourth Set) Mid-year starting or leaving work Mid-year change in tax credit Questions on cumulative tax (Fifth Set) Questions on cumulative tax (Sixth Set) Chapter 4……..Emergency and Temporary Tax Systems..................…..….……...49 Introduction Sample Revenue Emergency Tax Deduction Card Emergency Tax and USC data Questions on emergency tax Temporary Tax - Explanation and Tax Deduction Card Questions on temporary tax

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Chapter 5……..Tax Forms.......................................................…..………...........…...59 Introduction P30 Form P45 Form Questions on completing the P45 Employers’ duties at the end of the tax year P60 Form Questions on completing the P60 P35L and P35 Forms Questions on completing the P35L and P35 Forms Chapter 6……..Treatment of Married Persons and Civil Partners ……………......71 Basis of Assessment

− Joint Assessment

− Separate Assessment

− Separate Treatment Worked examples of assessment methods Questions on assessment methods Impact of Budget Changes on Annual Take-Home Salary Questions on impact of budget changes Chapter 7……..Computer Payroll………………………………………………….…….78 Introduction to Micropay Step-by Step Guide to payroll processing Computer payroll exercises Advantages of a computerised payroll system Chapter 8……..Revision Assignments ..............................……..…….………...…102 Sample Assignment Brief Sample Computer Payroll Examination Appendix 1…….PRSI Rates of Contribution and USC Thresholds………….…..114 Appendix 2….....Income Tax Data………………….…………………………………..117 Appendix 3…….Income Tax Calendar…………………………………….…………..121 Appendix 4……Personal Taxation Data for a Selection of Years ………….……123 All rights reserved.

No part of this publication may be reproduced, copied or transmitted in any

form or by any means without the written permission of the author.

© Dympna Dolan 2016

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Component Details (Extract) Title: Payroll Manual and Computerised Award Type: Minor Code: 5N1546 Level: 5 Credit Value: 15 Purpose The purpose of this award is to equip the learner with the knowledge, skills and competence to operate and maintain accurate payroll records using manual and computerised systems, for an organisation, working under general direction and supervision. Learning Outcomes Learners will be able to:

1. Explain the key terminology associated with personal taxation in preparing and maintaining payroll records both manually and on the computer

2. Outline the advantages and disadvantages of a computerised system over a manual one for payroll processing purposes

3. Process the payroll for employee(s), using manual and computerised systems, under the cumulative tax system, to include; various elements of gross pay, holidays, unpaid leave, cut-off points, credits, all statutory and non-statutory deductions

4. Process the payroll for employee(s), under the emergency and temporary tax systems and subsequent transfer to the cumulative tax system

5. Demonstrate the changes in personal tax due to various factors to include; mid-year commencement and leaving of employment, changes in credits, refunds

6. Extract information from completed records to prepare all necessary mid-year and year end tax forms for employees

7. Extract information from completed records to prepare all necessary end-of-period and year end returns and tax forms for the Revenue Commissioners

8. Assess the effect of using alternative assessment methods to calculate the annual tax liability of married couples

9. Analyse the impact of changes in legislation on personal tax and take-home pay by comparing two tax years

10. Print a selection of reports after backing up computerised data on a suitable medium.

Assessment The techniques set out below are considered the optimum approach to assessment for this component. In exceptional circumstances providers may identify alternative assessment techniques through the provider's application for programme validation which are reliable and valid but which are more appropriate to their context. Assessment Techniques In order to demonstrate that they have reached the standards of knowledge, skill and competence identified in all the learning outcomes, learners are required to complete the assessment(s) below.The assessor is responsible for devising assessment instruments. All learning outcomes must be assessed. Assignment = 60% Examination – Practical = 40%

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Chapter 1

Payroll – Terminology and Concepts In this chapter you will learn: • some of the essential terminology and concepts associated with payroll

• how to calculate an employee’s gross pay from given data. QUIZ

Let’s begin with a short quiz. This is just to asses your current knowledge of a range of

terms and concepts used in payroll.

Have a look at the following true or false statements. Indicate your answer by circling

the letter T or F. 1. Gross pay: the pay of an employee who works at least 39 hours per week. (T or F)

2. Basic pay: the part of an employee’s pay that is not taxed. (T or F)

3. Wage: pay an employee receives if he or she works on a weekly basis only.(T or F)

4. Salary: pay an employee (usually a manager) receives every month. (T or F)

5. PAYE means Pay All You Earn (T or F)

6. The tax calendar year starts on 5 April (T or F).

7. Superannuation: a large (super) increase an employee receives in his or her

annual salary (T or F)

8. Statutory deduction: a fixed deduction from an employee’s pay. (T or F)

9. Non-statutory deduction: a deduction from pay that can change from week to

week. (T or F)

10.Public sector employee: a person who works in a large company dealing with

the public. (T or F)

11. Private sector employee: a person who works in a family-owned business only.

(T or F)

12. PPS means ‘Personal Pension Scheme’. (T or F)

13. A benefit-in-kind (BIK) is a social welfare payment you receive to top up the

income you receive from your employer. (T or F)

14. Holiday pay is not taxed. (T or F)

15. PRSI means ‘Pay your Relations Social Insurance’. (T or F)

16. LPT means ‘Large Personal Tax. (T or F)

Now compare your answers with those on page 9. Each of the items above are

explained on the following pages.

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EXPLANATION OF TERMS

Gross Pay

This is an employee’s pay of any kind and may consist of up to 30 different

components. The most common ones are: salary, wage, overtime, bonus,

commission, holiday pay, back pay, workplace pensions, benefits-in-kind (e.g.

company car), piecework pay (e.g. strawberry-pickers who are paid €1.00 per box

picked) and Disability Benefit. Gross pay of any description is taxable.

Basic Pay

This is the pay an employee receives for working a regular week or month, typically a

39-hour week. It is pay earned without any overtime payments, bonuses, etc. Other

terms used to describe this pay include: ‘standard’, ‘ordinary’ and ‘flat’ pay. Basic pay

is taxable.

Wage

This is an amount of money (payment) earned by an employee for work done. It is

usually calculated on an hourly basis. For example, Mary works a 39-hour week and

she is paid €8.00 per hour. Her gross wage is €312.00 (i.e. 39 x €8.00). Another

method of calculating a wage is by piece-rate pay. For example, a strawberry-picker

who fills 400 boxes and is paid €1.00 per box receives a wage of €400.00. A wage may vary from week to week or month to month. This depends on the number

of hours worked, overtime, bonuses, etc.

Salary

A salary is a fixed sum of money (payment) earned by an employee for work done.

The payment (which may be paid on a weekly, fortnightly or monthly basis), unlike a

wage, does not change. However, if an employee receives an increase in salary (e.g.

a promotion) then the fixed payment is adjusted on a weekly, fortnightly or monthly

basis thereafter.

PAYE PAYE means Pay As You Earn. The PAYE system is the method used by the

Revenue Commissioners to collect, based on an employee’s income, the following

taxes • income tax

•Pay-Related Social Insurance (PRSI)

•Universal Social Charge (USC)

The PAYE system came into operation in Ireland on 6October 1960 for a limited number of employees.Since then it has been extended to cover almosteveryone who is paid a wage or a salary. Tax Calendar

The income tax calendar year starts on 1 January and ends on 31 December. Prior to 1 January 2002 the tax year started on 6 April and ended on 5 April the following year. The 5 April year-end dates back to 1752 when the British government replaced its

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CALCULATING GROSS PAY

Gross pay includes a range of payment types such as wage, overtime, bonus, etc. Example 1.1 Assume overtime rates are as follows:

From Monday to Friday:

• the first hour is paid time plus one-quarter (1.25)

• the second hour is paid time plus one-half (1.50)

• the third and subsequent hours are paid double time (2.00). On Saturday:

• the first two hours are paid time plus one-half (1.50)

• the third and subsequent hours are paid double time (2.00).

Margaret Furlong worked a 39-hour week (ordinary) for which she is paid €9.50 per

hour. She also worked the following overtime hours during the week: • Monday: 2 hours

• Tuesday: 3 hours

• Thursday: 2 hours

• Saturday: 2 hours. The calculation of Margaret’s hours worked is as follows:

Overtime

Day x 1.25 x 1.50 x 2.00

Monday 1 1 0

Tuesday 1 1 1

Thursday 1 1 0

Saturday 0 2 0

Total 3.75 7.50 2.00

Total of overtime hours: 13.25 Ordinary hours: 39.00 Total hours worked: 52.25 The gross pay calculation is as follows: 52.25 hours x €9.50 per hour = €496.38

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QUESTIONS ON GROSS PAY In your Workbook complete the gross pay calculation for the following employees. You may assume a 39-hour ordinary working week and use the overtime rates outlined on the previous page.

1. Anne Ryan worked an ordinary week and is paid €9.25 per hour. She also worked

the following overtime hours during the week:

• Monday: 1 hour


• Saturday: 4 hours.

2. Colin Rooney worked an ordinary week and is paid €11.50 per hour. He also worked

the following overtime hours during the week:

• Monday: 3 hours


• Thursday: 1 hour

• Saturday: 4 hours.

3.

4.

5.

Quiz answers:

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Chapter 2

The PAYE System In this chapter you will learn about: • some more terminology associated with the PAYE system

• the Tax Credit and Universal Social Charge Certificate

• the current rates of tax, tax bands and some of the main tax credits/reliefs

• PRSI and how to calculate it

• USC and how to calculate it

Finding Current Information on Tax, USC and PRSI Details

Relevant up-to-date information on tax is available from: • Your local tax office. The Revenue Commissioners have in place a regional

structure to simplify and streamline the ways in which they deliver services to their

customers. If you are a PAYE employee, your tax affairs are dealt with in the region

where you live. If you are self- employed, your place of business dictates the region

where your tax affairs are dealt with.

• Revenue Forms and Leaflets Service on LoCall 1890 306706.

• Office of the Collector-General, P35 Section, Nenagh, Co. Tipperary.

LoCall 1890 254565.

• The Revenue Commissioners’ website www.revenue.ie is very good.

• The Revenue On-Line Service (ROS) at www.ros.ie provides the quickest and

most efficient way for business customers (most of whom file on-line) to conduct

their business with Revenue.

• The new self-service options for contacting the Revenue Commissioners enable PAYE taxpayers to carry out transactions with more flexibility by:

– phone: a number of transactions can be carried out using the LoCall (1890)

telephone number shown on the tax credit certificate

– text: similar to the phone, a number of transactions can be carried out using a

mobile phone

– Internet: taxpayers can visit the Revenue Commissioners’ website and register

on its electronic services portal.

PAYE Anytime, which can be accessed through myAccount is Revenue’s online. You can income, submit an annual tax return and update your personal information.

To use PAYE Anytime you must be registered for myAccount. PAYE Anytime users can access myAccount using their PAYE Anytime PIN and you can:

• View your tax record

• Claim a wide range of tax credits

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• Apply for refunds of tax including health expenses

• Declare additional income

• Request a review of your income tax liability for previous years

• Re-allocate credits between yourself and your spouse or civil partner

• Track your correspondence submitted to Revenue Benefits:

• Manage your own tax affairs in a quick, easy, free and secure manner

• Immediate update of your tax credits

• Speedy refunds

• Secure access 24 x 7 x 365

• Environmentally friendly

TAX CREDIT AND UNIVERSAL SOCIAL CHARGE CERTIFICATE If you are working at present or have worked in the past you are probably familiar with

a Tax Credit and USC Certificate (TCC). You will need to complete Form 12A to apply

for and send it to the Revenue Commissioners if you are your tax credits and reliefs

for 2016. The certificate is usually updated on an annual basis. Figure 2.1 shows a

sample Tax Credit and USC Certificate (employee part).

.

What is a PAYE P2C? The P2C is the employer's copy of an employee's PAYE Tax Credit Certificate (TCC). It does not list the credits to which an employee is entitled, thereby safeguarding his or her privacy. A P2C is issued to the employer whenever a new or amended TCC is When is the P2C issued? In December each year the employer receives a 'Bulk Issues' of P2Cs for the following

year for all employees. Thereafter the employer will receive a copy (P2C) each time one of the employees receives either a new or amended Tax Credit Certificate or

Figure 2.1 Tax Credit and Universal Social Charge

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Universal Social Charge Certificate (employee part) Certificate (employee part)

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It is the employee’s responsibility to ensure that he or she has an up-to-date tax credit

certificate. It is also the employee’s responsibility to complete an annual tax return

form (Form 11) if requested by the Revenue Commissioners. The two main purposes

of this form are to:

• declare the total amount and sources of income (as accurately as possible)

• claim tax credits.

If an employee has more than one job at the same time (e.g. a full-time job during the

day and a part-time job in the evening), a separate tax credit certificate is issued to

each to each employer based on the information supplied by the employee or on a

request made by him or her. A tax credit certificate may be valid for 1 year or for more than 1 year (i.e. multi-year).

An instruction printed on the top of the certificate will indicate that it is valid for one of

the following (2016 equals the relevant tax year): • the year 2016 and following years commencing 1 January 2016

• the year 2016 only commencing 1 January 2016. If the certificate is in the first category, the employer will continue to use it as the basis

for the government usually introduces tax-related changes in the annual budget. The tax office will issue an amended tax credit certificate if it discovers errors on the

original. will be issued with the relevant amended tax credit certificate (P2C)

concurrently. It is the employer’s responsibility to always operate PAYE on the basis of the certificate

showing the most recent date of issue.

TAX RATES The tax rates for this year are shown in Appendix 2 on page118.

TAX BANDS A tax band is a fixed amount of taxable income that is taxed at the standard rate of tax. Any taxable pay exceeding the band amount is taxed at the higher rate. The annual tax bands for this year are shown in Appendix 2 on page 118.

Example 2.1 Mike and Teresa Horan, a married couple, earn €38,000 and €44,000 respectively. Their income, as individuals, is taxed as follows: Mike Teresa

€33,800 x 20% = €6,0 €33,800 x 20% = €660

€ 4,200 x 40% = €1,0 €10,200 x 40% = €480

As a couple, the calculation is as follows: Band (€42,800 + €24,800) = €67,600 x 20% = €13,520

The tax treatment of married couples/civil partners is dealt with fully in Chapter 6.

QUESTIONS ON TAX BANDS

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In your Workbook calculate the income tax due for Tom and Helen, a married couple.

Calculations are to be based on their status as a married couple and as individuals.

Use Example 2.1 as a guide.

1. Tom earns €48,000 and Helen earns €40,000.

2.

3.

STANDARD RATE CUT-OFF POINT The Standard Rate Cut-Off Point (SRCOP) is the amount of income up to which point tax is charged at the standard rate. Any income earned above this point is taxed at the higher rate. The cut-off point is the same as the tax band but the amount may be adjusted for any non- PAYE income or allowable expenses. Likewise all employees

The cut-off point varies from person to person depending on their personal

circumstances. The following examples. The tax office calculates with the monthly and

weekly equivalents, is shown on the taxpayer’s Tax Credit Certificate,

Example 2.2

Orla Burke is a single person earning €38,000. Her annual tax band is €34,200. She is taxed as follows:

€34,200 x 20% = €6,840

€ 3,800 x 40% = €1,520

Gross tax = €8,360

TAX CREDITS Employees can claim a number of credits or allowances that help to reduce their tax bill. information to the local tax office in order to claim any other tax credits. PAYE Anytime users can access myAccount using their PAYE Anytime PIN and claim their credits: All employees are automatically entitled to the following tax credits: • Personal

• PAYE

• Flat Rate Expenses. Similar to the cut-off point, the amount of an employee’s annual tax credit may be

adjusted to take account of any non-PAYE income and or expenses. The tax credit is

reduced by the non-PAYE income and increased by expenses. The non-PAYE income

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Flat Rate Expenses All employees are entitled to a flat rate expenses credit. Such expenses are incurred

by virtue of being employed. They are directly related to the ‘nature of the employee’s

employment’. The amount has been agreed between the representative body (usually Incapacitated Child Credit The tax credit can be claimed where a claimant proves that he or she has living at any time during the tax year any child who:

• is under 18 years of age and is permanently incapacitated either physically or mentally, or

• if over 18 years of age at the commencement of the tax year and is permanently incapacitated before reaching 21 years, or Where more than one child is permanently incapacitated, a tax credit may be claimed for each child. The credit is also available for incapacitated adopted children and stepchildren. Home Carer’s Credit A couple in a marriage or civil partnership where one spouse or civil partner is the

Home Carer and cares for one/more dependent persons is eligible for a tax credit.

The is due irrespective of the number of persons being cared for. To receive the home

carer’s credit the following conditions must be met: • the home carer must care for one or more dependent persons, a dependent Dependent Relative Credit Any individual who maintains a relative at his or her own expense can claim this credit

if the relative:

Claimant must have a relative who:

• is unable by way of old age or infirmity to maintain himself or herself Other Allowable Tax Credits (Reliefs) Medical Expenses Relief Tax relief may be claimed in respect of the cost of certain medical expenses paid by the Revenue Commissioners. However, you cannot claim tax relief for any expenditure which:

• has been, or will be, reimbursed by another body such as the VHI, Laya Healthcare, To claim relief, the taxpayer must submit a MED 1 form to the tax office, which details the qualifying expenses incurred. The taxpayer must retain receipts for all qualifying expenditure for inspection by the Inspector of Taxes. The relief for any tax year is based on the actual medical expenditure incurred during that year. Relief will be

.

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Medical Insurance Tax relief may be claimed on the insurance premium paid to a Revenue-approved health insurer (e.g. VHI, Laya Healthcare, Hibernian Aviva) for medical cover. The tax premium paid. For policies renewed or entered into on or after this date the tax relief per person covered by a policy will be limited to either:

The medical insurer claims the amount given as tax relief from the government.

Example 2.3 Claire renewed her medical insurance policy with VHI in January 2016. The policy cost €2,000.00 gross. The net cost of her insurance is calculated as follows: Insurance premium = €2,0.00 Maximum tax relief = €00.00 (€1,000 x 20%) Net premium cost = €1,0.00

The VHI claims the tax relief of €200.00, granted to Claire,from the government. Mortgage Interest Relief A mortgage loan is defined as a loan used by an individual solely for the purpose of

the purchase, repair, development or improvement of a private residence (home).

Mortgage interest relief only applies in the case of mortgages on the main or only

residence of the taxpayer.

A mortgage taken out from 1st January 2004 to 31st December 2012, used to

Other Credits and Reliefs There are other credits and reliefs that an individual can claim, such as age credit,

blind person’s credit, covenants and fees paid to approved colleges.

CALCULATING TAX CREDITS The following examples illustrate how tax credits are calculated for employees for the

current tax year. Calculations are based on. The flat rate expenses credit is not

included in the calculations. Example 2.4 Eoin Mahoney is a single person. His tax credits are calculated as follows:

€ Single Personal 1,0 PAYE 1,50 Total Tax Credit 3,300

Eoin’s monthly tax credit is €275.00 (€3,300 ÷ 12) and his weekly tax credit is €63.46

(€3,300 ÷ 52).

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Example 2.5 Anne Ryan has been a widow for 2 years. She has 2 children, aged 6 and 9. She paid

€425.00 on house insurance. Her tax credits are calculated as follows:

€ Widowed Personal 1,0 Widowed parent 3,10 Example 2.6 Brian and Anne Smith are a married couple. They have a 7-year-old daughter with

special the family, qualifying for credit entitlements. Brian and Anne both work outside

the home. Their combined credits are calculated as follows:

€ Married Personal 3,300

QUESTIONS ON TAX CREDITS In your Workbook calculate the annual tax credits for the employees detailed below

Use the relevant information for the current tax year, see Appendix 2. If you wish you may also calculate the following for each employee: • the monthly tax credit by dividing the annual total by 12

• the weekly tax credit by dividing the annual total by 52. Do not divide the

monthly figure by 4. Think about it.

1. Marion King is a single person. 2. Rita Carroll has been a widowed for since 2014. 3.

4. Michael Healy has been a widower for years. He has 2 children, aged 1and 1.

5.

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PRSI - PAY-RELATED SOCIAL INSURANCE What is Pay-Related Social Insurance (PRSI)? Pay-related social insurance (PRSI) contributions go to the Social Insurance Fund (SIF) which helps pay for Social Welfare benefits and pensions. There are 9 different categories or classes of PRSI. The most common class is Class A. Most classes are What money is PRSI calculated on? All gross income/earnings is liable for PRSI. This is called “reckonable earnings” for PRSI purposes. Gross income, commission, bonus etc. It also includes notional pay, which is a benefit-in-kind (BIK). Who pays PRSI? With very few exceptions all employees whether full-time or part-time earning €38 or more per week self-employed workers with an income of €5,000 a year or more who are aged 16 or over and under pensionable age, are liable for Pay-Related Social How is PRSI Calculated? PRSI contributions will be payable on the following basis:

• the employee’s share at the appropriate rate on all reckonable earnings

• the employer's employee’s reckonable earnings Employees covered under Classes A, B, C, D and H with reckonable earnings of not more than that week. However, the employer's share of How are PRSI rates determined? The class of PRSI on which an employee is placed depends on a number of factors, including:

• whether the employment is in the public or private sector (e.g. permanent and

pensionable employees recruited before 6 April 1995 in the public sector pay Class D

PRSI)

• the nature of the employment (e.g. self-employed people pay Class S PRSI)

• the earnings of the employee (e.g. an employee earning less than €38.00 per week

normally pays Class J PRSI). An employee may be moved from one subclass of PRSI to another if his or her pay

changes, but not between classes. For example, an employee on Class A PRSI may.

Collection of Contributions Most employees pay PRSI through Revenue's PAYE system. However, employees

who do not pay tax earnings through the special collection system operated by the

Department of Social Protection.

Refunds / Rebates If a person has overpaid PRSI contributions an application for a refund should be

made of the last day of the contribution year in respect of which the contributions

concerned were paid.

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Application for a refund should be sent to:

PRSI Refunds Section

Department of Social Protection

Gandon House,

Amiens Street,

Dublin 1

PRSI Credit

A new PRSI credit was introduced in . For employees earning between €31 and the

amount payable by the employee, calculated at 4.0%. The maximum weekly credit is

€12.00 for earnings of . The PRSI credit applies to earnings coming under classes

and only.

Where can I get information on PRSI? Information on PRSI is available from your local social welfare office or the Department of Social Protection website at www.welfare.ie.

CALCULATING PRSI CONTRIBUTIONS For information on the PRSI Classes A, B and D see Appendix 1. Example 2.7 Catherine Bruen earns €350.00 per week and pays subclass AO PRSI.

Solution: (EE) Employee’s share x 0.0% = €0.00 (ER) Employer’s share x 8.50% = Total Contribution = Example 2.8 Darren Mc Callig earns €360.00 per week and pays subclass AX PRSI.

Solution: (EE) Employee’s share Maximum credit allowable = €2.00 €360.00 - €352.01 = €7.99 ÷ 6 = € 33 Reduced credit value = €1.67 Example 2.9 Liz Mc Cann earns €400.00 per week and pays subclass AL PRSI. Solution: (EE) Employee’s share

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Maximum credit allowable = €12.00 €400.00 - €352.01 = €47.99 ÷ 6 = € 8.00 Reduced credit value = € 4.00 €400.00 x 4.0% = €16.00 Deduct credit =

Example 2.10 Michael Edwards earns €420.00 per week and pays class AL PRSI. He works overtime on his total gross pay was €00.00, thus he is liable for class A1 PRSI. Solution: Week 1 (EE) Employee’s share Maximum credit allowable = €100 €420.00 - €352.01 = €67.99 ÷ 6 = €133 Reduced credit value = € 0.67 Total Contribution = €.28 Solution: Week 2 (EE) Employee’s share €500.00 x 4.0% = €20.00 (ER) Total Contribution = €7.75

QUESTIONS ON PRSI CONTRIBUTIONS In your Workbook complete the PRSI calculations for the employees below. In each of the following cases: • identify the PRSI class for the employee

• calculate the total amount of PRSI (employer and employee contributions) using the

current rates of PRSI, see Appendix 1.

1. Gerard Silke works as a staff, earning €660.00 per week

2. Angela O’Donoghue has on a permanent basis since May 1989, earning

€800.00 per week

3. Maeve Walsh per month.

4.

5.

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UNIVERSAL SOCIAL CHARGE

The Universal Social Charge (USC) was introduced into the tax code in January 2011.

It is a tax payable on gross income from all sources, including notional pay. You can

refer to Appendix 2 on page 118 for the current rates and information.

Universal Social Charge is not payable if your gross income is less than €13,000 per

year. Once on all of your income at the relevant rates of USC. The Universal Social

Charge is payable on pension

How is USC calculated? The USC is calculated on a weekly or monthly basis depending on the pay frequency.

The amount of income liable for USC is divided into different cut-off amounts and a

Example 2.11 John’s earnings and USC payable for the first 7 weeks of the tax year are as follows.

In the example above USC is calculated on the cut-off amounts at the different rates. For week 1 this is generated as follows:

€.00 x 1.0% €.00 x 3.0% €.00 x 5.5% =

Total USC due =

Note: The amount deducted at the .5% is €500.00 less the sum of €31 and €8.

USC is calculated for the year on a cumulative basis. For each individual week the amount of USC deducted is calculated by deducting the previous week’s amount from the current one. For example, This amounts to €3.91 also as the pay is the same.

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Example 2.12 Emma’s earnings and USC payable for the first 7 weeks of the tax year are as follows:

In the example above Emma’s USC has been reduced to €2.91 in week 3 because her pay is less kings of the cumulative system means that in week 5 she receives a USC refund. This is because Example 2.13 Frank’s earnings and USC payable for his first 3 weeks of work are shown below.

In this example Frank’s USC is €5.00 instead of €3.91 as shown in Examples 2.11 and 2.12. This is because his earnings have not exceeded the threshold for USC at the % and % rates. All of his earnings

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Chapter 3

The Cumulative Tax System

The majority of employees are taxed under the cumulative (normal) tax system. It is

the duty of the, for every employee. If the employer has neither of these, then the

‘emergency’ or ‘temporary’ tax systems operate, dealt with in Chapter 4.

the Revenue Commissioners to assist an employer in the calculation of tax, PRSI and

USC.

FIGURE 3.0 REVENUE – ELECTRONIC CUMULATIVE TAX DEDUCTION CARD

A completed ‘own-system’ TDC for Mary Kennedy for the first 8 weeks of the tax year

is shown in Figure 3.1. Each element of the tax deduction card is explained, as follows:

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Week Number If an employee is paid in week 1, then the pay day must be between 1 January and 7 January inclusive. January inclusive, and so on. See the Income Tax Calendar in Appendix 3.

Standard Pay This is an employe’s basic or normal pay not including any additional earnings such as bonus, commission etc. Overtime, Bonus etc This is non-basic pay and is usually earned on an irregular basis. Gross Pay This is an employee’s total pay before any deductions are taken from it. This is the figure on which PRSI and the USC are calculated. Gross less Pension This is the total pay (i.e. basic pay plus extras such as overtime, bonuses, etc.) after superannuation and health benefit (if any) are deducted. This is the figure on which income tax is calculated.

Cumulative Pay to Date This is the combined or running total of the employee’s gross pay less pension for the year to date (YTD).

Cumulative Cut-Off Point This is the amount of money that is liable for tax at the standard rate each week of the tax year, and this is then divided equally into weekly or monthly amounts for the year. It accumulates during

Cumulative Standard Tax This is the amount of tax that the employee owes at the standard or lower rate of tax. The cumulative standard rate cut-off point figure or the cumulative gross pay to date figure by the standard rate tax percentage. For week 1 in this example Cumulative Higher Rate This is the amount of tax that is owed at the higher rate. The amount is calculated by subtracting the gross pay figure and then multiplying the result by 40%. Cumulative Gross Tax This is the sum of both amounts of tax calculated at both the standard and higher rates. For week 4 in this example it is €0.00 + €.60 = €7.60. Cumulative Tax Credit This is the amount of money by which a person’s tax liability is reduced. It is deducted from, the tax office calculates the annual tax credit to which a person is entitled. This figure is then divided equally for the tax year. It accumulates forward and offset against tax due in subsequent weeks/months on the cumulative basis. Any unused tax credit is not carried over into the next tax year.

23

Cumulative Tax Due This is the amount of tax that is owed for the year so far. It is calculated by deducting the cumulative tax credit from the. For week 1 in this example it is € deducting the cumulative tax credit from the cumulative gross tax was negative then the cumulative tax would be .

Tax Refund If in any individual week or month the previous week’s or month’s cumulative tax is greater than the present week’s or month’s cumulative tax, then a refund is due to the employee. This occurs in week 7.

Cumulative Gross Pay for USC USC is calculated on total gross pay before pension, if any, is deducted. Cumulative USC USC is calculated in a similar way to income tax i.e. on the cumulative PAYE system. USC The USC amount for each individual period is calculated. It is calculated by subtracting the previous week’s or month’s cumulative USC from the present week’s or month’s cumulative USC. In this example the cumulative.22. In week 1 €1.06 was already deducted therefore in week 2 the amount deducted is €.16. Tax This is the amount of tax that is deducted in an individual week or month. It is calculated by subtracting the previous week’s or month’s cumulative tax from the present week’s or month’s cumulative tax, similar to the USC method of calculation. PRSI PRSI is calculated on gross pay each week or month i.e. not on the cumulative figure. Mary’s share of PRSI.20 The employer’s share is calculated as follows: The total PRSI contribution is the sum of the employee and employer amounts which is €2.93. Mary’s gross pay in AO PRSI for this week which is zero percent for the employee and 8.5% for the employer.See Appendix . Total Deductions The total amounts of tax, USC and PRSI are calculated weekly/monthly. Net Pay This is the employee’s take-home pay. It is calculated by taking the deductions from the gross pay less pension. Note that there is a tax refund (rebate) in week 7. ER PRSI See PRSI above. Total PRSI See PRSI above.

24

Example 3.1 Mary Kennedy earns €630.00 basic pay per week. In addition she earns on unpaid sick leave and her pay was reduced accordingly.

She pension. Her first pay day is January. Her weekly income tax cut-off point is her tax credit is €. She pays PRSI.

FIGURE 3.1 TAX DEDUCTION CARD FOR MARY KENNEDY

Wk No.

Standard Pay

Overtime Bonus etc

Gross Pay

Gross Less Pension

Cumulative Pay to Date

Cum. Cut-Off Point

Cumulative Standard Tax

Cumulative Higher Tax

Cumulative Gross Tax

Cumulative Tax Credit

Cumulative Tax Due

Tax Refund

1 630.00 0.00 6.00 611.10 611.10 650.00

122.22 0.00 122.22 63.46 58.76 0.00

2 30.00 20.00 650.00 630.50 1,241.60 1,300.00 248.32 0.00 248.32 126.92 121.40 0.00

3 630.00 0.00 0.00

1,920.60 384.12 0.00 4.12 0.38 .74 0.00

4 60.00 90.00 .00 698.40 2,619.00 2,600.00 520.00 7.60 527.60 53.85 73.75 0.00

5 630.00 100.00 730.00 708.10 3,327.10 3,250.00 650.00 30.84 17.31 .53 0.00

6 00.00 0.00 0.00 485.00 3,812.10 3,900.00 762.42 0.00 2.42 380.77 81.65 0.00

7 300.00 0.00 300.00 291.00 4,103.10 4,550.00 820.62 0.00 80.62 4.23 6.39 5.26

8 630.00 0.00 30.00 611.10 4,714.20 5,200.00 942.84 0.00 2.84 507.69 5.15 0.00

Wk No.

Cumulative Gross Pay for

USC

Cumulative USC

Weekly Deductions

USC Tax PRSI

Total

Deductions

Net

Pay ER

PRSI

Total

PRSI

1 630.00 1.06 21.06 58.76 25.20 15.02 56.08 67.73 92.93

2 1,.00 43.22 22.16 62.64 6.00 0.80 19.71 9.88

3 180.00 8.13 24.91 72.34 28.00 15.25 53.76 75.25 13.25

4 2,7.00 91.14 26.01 80.02 28.80 134.83 3.58 77.40

5 3,0.00 120.70 26.56 89.78 9.20 15.54 78.48 107.68

6 3,30.00 4.61 13.91 18.12 20.00 52.03 432.98 53.75 73.75

7 4,230.00 13.52 2.91 0.00 0.00 2.91 293.35 25.50

8 4,860.00 8.58 21.06 58.76 .20 105.02 67.73 92.93

25

QUESTIONS ON THE CUMULATIVE TAX SYSTEM (FIRST SET)

Complete the tax deduction cards in your Workbook for the following employees for

the first 5 weeks of the tax year.

Use the current data for credits, cut-off points, tax, PRSI and USC in your calculations (see Appendix1 and Appendix 2).

1. James Reilly is a single person. He pays class A PRSI. His basic pay is

€00.00per week. He in both weeks 4 and 5.

2. Laela O’ Kelly is a single person. She pays towards her pension. She pays

class A PRSI. Her basic. She also earned overtime as follows:

• week 1: €20.00

• week 2: €60.00

•

3. Sheena Buttimer is a single person. She pays class PRSI. Her basic pay is €00.00 per week. She also earned overtime as follows:

• week 1: €20.00

• week 2: nil

26

Example 3.2 – Unpaid Leave

Maeve Clancy’s gross weekly earnings for the first weeks of the year are as follows:

• week 1: €445.00

• week 2: €00.00

• week 3: nil (unpaid leave)

She pays towards her pension. Her weekly tax cut-off point is €20.00 and her tax

credit is € pays PRSI. See Figure 3.2 on the following page for her completed tax

deduction card (TDC).

The entries circled on the TDC are explained below.

• Cumulative gross pay in week 3: The pay in this week is €897.75, the same as that in

week 2, because Maeve had no earnings in week 3. Her cumulative pay, therefore,

remains unchanged for this week.

• Cumulative tax due at standard rate in week 3: The cumulative tax due at the

standard rate in week 3 is the same as that in week 2.This is because there is no extra

pay in week rate. Furthermore, the cumulative standard rate cut-off point is.

• Cumulative tax credit in week 3: Maeve is entitled to a tax credit of €70.00 in week 3

even though she did not work in that week.This is because the tax credit is an annual

figure and accumulated over the year.

• Tax refund in week 3: Maeve’s gross tax in week 3 is the same as that in week 2.

However, she is entitled to her tax credit of €0.00 on a cumulative basis.This has the

effect week 2 she owed €39.95 cumulative tax and by week 3 she owed no

tax.Therefore, she is entitled

• Tax refund in week 6: This situation is similar to that in week 3. However, because

Maeve had earnings in this week (though small) the cumulative tax due has

increased. Again, in week 5 she owed € cumulative tax and by week 6 she owes

only €6.55.The difference between these two amounts results in a refund of €

• USC refund in weeks 3 and 6: Maeve’s cumulative gross pay in week 3 is the same as

that in week 2. However, the USC cut-off points. This has resulted in a refund of the

USC. In week 6 her gross pay dropped to €100.00 resulting in a USC refund also.

27

FIGURE 3.2 TAX DEDUCTION CARD FOR MAEVE CLANCY

Wk No.

Standard Pay

Overtime Bonus etc

Gross Pay

Gross Less Pension


Cum. Cut-Off Point





Cumulative Tax Due

Tax Refund

1 445.00 0.00 445.00 442.75 22.75 720.00 4.55 0.00 84.55 0.00 14.55 0.00

2 500.00 0.00 500.00 475.00 897.75 140.00 179.55 0.00 179.55 140.00 39.95 0.00

3 0.00 0.00 0.00 0.00 260.00 179.55 0.00 179.55 210.00 0.00 39.95

4 60.00 0.00 60.00 570.00 1,467.75 2,880.00 23.55 0.00 293.55 280.00 3.55 0.00

5 60.00 0.00 600.00 70.00 2,037.75 3,600.00 47.55 0.00 407.55 30.00 .55 0.00

6 00.00 0.00 100.00 95.00 2,132.75 40.00 426.55 0.00 426.55 420.00 51.00

7 00.00 0.00 500.00 475.00 2,607.75 5,040.00 521.55 0.00 521.55 0.00 31.55 0.00

Wk Cumulative

Gross Pay for USC

Cumulative USC

Weekly Deductions

USC Tax PRSI

Total

Deductions

Net

Pay ER

PRSI

Total

PRSI

1 45.00 10.88 0.88 1.55 17.80 .23 399.52 47.84 65.68

2 5.00 4.79 .91 5.40 20.00 .31 53.75

3 945.00 14.49 (10.30) 0.00 0.00 0.00 50.25 0.00 0.00

4 15.00 30.60 16.11 13.55 4.00 53.66 516.34 64.50 88.50

5 25.00 50.00 19.40 .00 24.00 7.40 4.50 88.50

6 2,245.00 41.91 (8.10) 0.00 4.00 4.00 155.10 10.75

7 2,745.00 5.82 .91 25.00 20.00 8.91 416.09 53.75 73.75

Remember: Income tax is calculated on the gross pay less pension figure whilst PRSI and USC are calculated on gross pay. Note: Any refund of tax and or USC due to an employee who has become unemployed will be made by the Revenue Commissioners on receipt of a completed P50 form and selected parts of a P45 for

28

QUESTIONS ON THE CUMULATIVE TAX SYSTEM (SECOND SET)

Complete the tax deduction cards in your Workbook for the following employees for

the first 5 weeks of the tax year. Use the current data for credits, cut-off points, tax, PRSI and USC in your calculations (see Appendix and Appendix ).

1. Ellie Edmond is a married person. She is entitled to the basic tax credits and cut-off point; husband. She pays class A PRSI. Her basic pay is €0.00 per week. Her overtime earnings for both €50.00. She took one week’s unpaid leave in week 3.

2. Susie Cunningham is a single person. She pays towards pension. She is entitled to the basic tax credits and cut-off point. She pays class D PRSI. Her basic pay is €700.00 per week.

Her overtime earnings were:

• weeks :

• weeks 2

She took one week’s unpaid leave in week .

HOLIDAYS Holiday pay is earned against time worked. All employees whether full-time, part-time,

temporary or casual earn holiday entitlements from the time work is commenced.

The Organisation of Working Time Act provides that most employees are entitled to

4 weeks’ annual holidays, with pro-rata entitlements for periods of employment of less

than 1 year.

In order to qualify for 4 weeks’ annual leave an employee must have either:

• worked for the employer for at least 117 hours in each calendar month or

• worked for the same employer for at least hours during a ‘leave year’. A leave year is a period of up to 20year, commencing when the employee takes up

duty. Pro-rata entitlements in terms of a percentage of time worked apply to part-time

workers.

The time at which annual leave may be taken is determined by the employer with

regard to work if the employee is not paid by electronic funds transfer (EFT) on a

regular weekly, monthly or fortnightly basis.

The Organisation of Working Time Act 1997 also provides for 9 public holidays:

• 1 January (NewYear’s Day)

• St Patri Day

• the first day in May

29

• the first Monday in

• the first day inAugust

• the last day in October

• Christmas Day

• St Stephen’s Day.

In respect of each public holiday an employee is entitled to one of the following

options: • a paid day off on the public holiday

• a paid day of the public holiday

• an extra leave

• an extra day’s pay.

The Organisation of Working Time Act provides that you may ask your employer at least, which of the alternatives will apply. If your employer fails to respond at least days before the public holiday, you are entitled to take the actual public holiday as a paid day off.

Holiday Pay

The tax credits and cut-off points to be used in the calculation of holiday pay paid in

advance of, the effect of paying holiday pay in advance is that the employee receives

the equivalent of or weeks’ pay in the same week and no pay on the normal pay and

holiday pay.

Nowadays most employees’ salaries are paid by EFT(Electronic Funds Transfer)

into their bank account and therefore their holiday pay is processed in the same way

as a normal weekly, monthly or fortnightly payment.

30

Example 3.3 – Holiday Pay Calculation Niamh Hennessy is taxed under the PAYE system. She earns €600.00 per week. Her weekly tax cut-off point is €650.00 and her tax credit is €65.00. She takes 2 weeks’ holiday from the week beginning 22 January (i.e. weeks 4 and 5). She receives her holiday pay in advance of her going on holidays. She pays class A PRSI. Her completed TDC is shown here.

FIGURE 3.3 TAX DEDUCTION CARD FOR NIAMH HENNESSY

Wk No.

Standard Pay

Overtime Bonus etc

Gross Pay

Gross Less Pension


Cum. Cut-Off Point





Cumulative Tax Due

Tax Refund

1 600.00 0.00 600.00 600.00 600.00 650.00 0.00 0.00 120.00 65.00 55.00 0.00

2 600.00 0.00 00.00 600.00 100.00 1,300.00 40.00 0.00 240.00 0.00 110.00 0.00

3 1,800.00 0.00 1,800.00 100.00 3,000.00 3,250.00 600.00 0.00 00.00 325.00 275.00 0.00

4 Holidays

5 Holidays

6 600.00 0.00 600.00 600.00 3,600.00 3,900.00 720.00 0.00 720.00 90.00 330.00 0.00

Wk Cumulative

Gross Pay for USC

Cumulative USC

Weekly Deductions

USC Tax PRSI

Total

Deductions

Net

Pay ER

PRSI

Total

PRSI

1 600.00 1.41 19.41 5.00 24.00 98.41 1.59 64.50

2 100.00 3.82 9.41 55.00 4.00 8.41 4.50 88.50

3 300.00 97.05 58.23 165.00 .00 95.23 1,4.77 265.50

4 Holidays

5 Holidays

6 3,600.00 116.46 19.41 55.00 4.00 98.41 501.59 64.50 88.50

Note: Niamh’s weekly tax cut-off point and credit amounts are carried forward to week 3. This is because these are her entitlements by week 5 taking into account her two-week holiday and being paid in week 3.

31

QUESTIONS ON THE CUMULATIVE TAX SYSTEM (THIRD SET)

Complete the tax deduction cards in the your Workbook for the following employees

for the first 6 weeks of the tax year.

Use the current data for credits, cut-off points, tax, PRSI and USC in your calculations (see Appendix 1 and Appendix 2).

Note: The employees are paid holiday pay in advance of going on holiday.

1. Ann Rooney, a single person, is a PAYE taxpayer. She is entitled to the

basic tax credits (annual leave) in weeks 4 and 5. She earns €55.00

overtime in week 6.

2. Sean Mooney, a married person, is a PAYE taxpayer. He is entitled to the

pay is €0.00 per week. He takes 2 weeks’ holidays (annual leave) in weeks 4

and 5.

3. Linda Morris, a married person, is a PAYE taxpayer. Her basic tax credits,

pays class B PRSI. Her basic pay is €800.00 per week. She takes 2 weeks’

holidays (annual leave) in weeks 3 and 4.

32

Example 3.4 – Monthly Pay Calculations Aoife Fogarty is paid on a monthly basis. Her monthly tax cut-off point is €2,816.67, her tax credit is €275.00 and she pays class A PRSI. Her gross monthly earnings for the first five months of the year are as follows:

• month 1: €400

• month 2: €00

• month 3: €800

• month 4: €000

• month 5: €000.

FIGURE 3.4 TAX DEDUCTION CARD FOR AOIFE FOGARTY

Mth No.

Standard Pay

Overtime Bonus etc

Gross Pay

Gross Less Pension


Cum. Cut-Off Point





Cumulative Tax Due

Tax Refund

1 400.00 0.00 4,0.00 40.00 4,80.00 2,816.67 563.33 1,356.66 275.00 1,081.66 0.00

2 4,50.00 0.00 40.00 4,500.00 00.00 5,633.34 1,126.67 1,466.66 2,3.33 550.00 23.33 0.00

3 4.00 0.00 4,800.00 400.00 100.00 8,450.01 1,690.00 2,2.00 3,950.00 325.00 0.00

4 4,0.00 0.00 4,0.00 4.00 180.00 11,266.68 2,253.33 2,733.33 46.66 1.00 0.00

5 500.00 0.00 5,000.00 5,00.00 23,100.00 14,083.35 2,816.66 3,606.66 6,423.32 1,375.00 5,048.32

0.00

Mth Cumulative

Gross Pay for USC

Cumulative USC

Monthly Deductions

USC Tax PRSI

Total

Deductions

Net

Pay ER

PRSI

Total

PRSI

1 4.00 205.08 205.08 1,081.66 192.00 1,478.74 3,321.26 56.00 708.00

2 900.00 393.67 188.59 961.67 1,0.26 3, 4.75 663.75

3 140.00 598.75 205.08 1,081.66 192.00 1,4.74 3,321.26 16.00 708.00

4 18,100.00 759.84 161.09 761.66 160.00 1,082.75 2, 430.00

5 230.00 975.93 216.09 11.66 200.00 1,577.75 3,422.25 7.50 737.50

33

QUESTIONS ON THE CUMULATIVE TAX SYSTEM (FOURTH SET)

Complete theTDCs in your Workbook for the following two employees for the first 5

months of the tax year. Use the current data for credits, cut-off points, tax, PRSI and USC in your calculations (see Appendix 1 and Appendix 2).

Note: Annual credits and cut-off points are divided by 12 to get the monthly figures

1. Michael Higgins is a single person and a PAYE taxpayer. He is entitled to the basic

tax credits and cut-off point. He pays class A PRSI gross pay for the first 5 months of

the tax year is as follows:

• month 1: €,000

• month 2: €,000

•

.

2. Anne Shaw, a married person, is a PAYE taxpayer. She is entitled to the basic tax

credits and the credit for with special needs.The tax credit and the cut-off point are

between herself and her husband. She pays class A PRSI. Her gross pay for the first

5 months of the tax year is:

• month 1: €,000

• month 2: €,800

•

34

WHAT HAPPENS WHEN AN EMPLOYEE STARTS WORK DURING THE TAX YEAR?

An employee may start work during the tax year because he or she is: • starting work for the first time after 1 January

• leaving one job and starting a new one.

The following examples illustrate these situations and how they are dealt with.

Example 3.5

Maria Buckley started work for the first time in February and her first pay day was on

the 15th. She.00 per week. Her weekly cut-off point is €00.00 and her tax credit is

€0.00. She pays class PRSI. See Figure 3. for her completed TDC.

Why does Maria not pay any tax until week 11? You’ve probably guessed it. Maria’s

first payment was in week 7 of the tax year (check the date on the income tax

calendar, see Appendix ). However, her tax credit and cut-off point amounts started in

week 1 and have been then. Remember that these are annual figures divided and

continues to do so in the following weeks.

Example 3.6

Denis Buckley left his old job and started work with his current employer in February.

He received his from the previous employer (you will learn about this form in Chapter

5). The relevant details from this form are: • weekly cut-off point is €.70

• weekly tax credit is €.30

• gross pay since 1 January is €,00.00

• tax paid since 1 January is €.20

• USC paid since 1 January is €46

• PRSI class A paid since 1 January: Employee €44.00 and Total €31.00. With his new employer, Denis is paid €650.00 basic pay per week and he earns commission worth €300.00 and €450.00 in weeks 0 and 2 respectively. His first pay day is on17 February. See Figure 3.6 for his completed TDC.

35

FIGURE 3.5 TAX DEDUCTION CARD FOR MARIA BUCKLEY

Wk No.

Standard Pay

Overtime Bonus etc

Gross Pay

Gross Less Pension


Cum. Cut-Off Point





Cumulative Tax Due

Tax Refund

1 700.00 70.00

2 1,400.00 40.00

3 20.00 0.00

4 2,800.00 280.00

5 3,0.00 50.00

6 4,200.00 40.00

7 800.00 0.00 800.00 800.00 800.00 400.00 160.00 0.00 160.00 490.00 0.00 0.00

8 800.00 0.00 00.00 800.00 5,600.00 320.00 0.00 320.00 0.00 0.00

9 0.00 800.00 800.00 2,400.00 6,300.00 480.00 0.00 480.00 630.00 0.00 0.00

10 800.00 0.00 800.00 3,200.00 70.00 640.00 0.00 640.00 0.00 0.00

11 800.00 0.00 800.00 800.00 700.00 800.00 0.00 800.00 770.00 30.00 0.00

12 800.00 0.00 800.00 800.00 4,800.00 8,400.00 960.00 0.00 960.00 40.00 10.00 0.00

13 800.00 0.00 800.00 800.00 5,600.00 100.00 1,120.00 0.00 1,120.00 0.00 210.00 0.00

Wk Cumulative

Gross Pay for USC

Cumulative USC

Weekly Deductions

USC Tax PRSI

Total

Deductions

Net

Pay ER

PRSI

Total

PRSI

1

2

3

4

5

6

7 800.00 30.41 30.41 0.00 32.00 62.41 737.59 86.00 118.00

8 1,600.00 60.82 30.41 0.00 62.41 86.00 118.00

9 91.23 30.41 0.00 32.00 737.59 86.00

10 3,200.00 121.64 30.41 0.00 32.00 62.41 737.59 86.00 118.00

11 152.05 30.41 30.00 32.00 92.41 707.59 86.00 118.00

12 4,800.00 182.46 30.41 90.00 32.00 647.59 86.00 118.00

13 5,600.00 212.87 30.41 90.00 32.00 152.41 647.59 86.00 118.00

36

FIGURE 3.6 TAX DEDUCTION CARD FOR DENIS BUCKLEY

Wk No.

Standard Pay

Overtime Bonus etc

Gross Pay

Gross Less Pension


Cum. Cut-Off Point





Cumulative Tax Due

Tax Refund

1 657.70 67.30

2 1,315.40 134.60

3 1973.10 1.90

4 230.80 2.20

5 38.50 36.50

6 3,600.00 346.20 03.80 316.20

7 650.00 0.00 650.00 650.00 4,250.00 3.90 850.00 0.00 850.00 0.00

8 650.00 0.00 650.00 650.00 4,900.00 980.00 0.00 90.00 5 441.60 0.00

9 650.00 0.00 650.00 650.00 5,550.00 59.30 1,110.00 0.00 1,110.00 605.70 0.00

10 650.00 950.00 950.00 6,7.00 1,300.00 0.00 73.00 627.00 0.00

11 650.00 0.00 650.00 650.00 7,150.00 1,430.00 0.00 1,0.00 7.30 0.00

12 650.00 450.00 1,100.00 1,100.00 8,250.00 7,892.40 1,578.48 143.04 1,21.52 07.60 913.92 0.00

13 650.00 0.00 650.00 650.00 8,900.00 8,550.10 1,710.02 139.96 149.98 874.90 975.08 0.00

Wk Cumulative

Gross Pay for USC

Cumulative USC

Weekly Deductions

USC Tax PRSI

Total

Deductions

Net

Pay ER

PRSI

Total

PRSI

1

2

3

4

5

6 116.46 144.00 531.00

7 4,250.00 138.62 22.16 62.70 110.86 539.14 69.88 95.88

8 4,90.00 22.16 62.70 26.00 110.86 69.88

9 5,0.00 182.94 22.16 62.70 26.00 110.86 539.14 69.88 95.88

10 6,0.00 221.60 38.66 122.70 38.00 750.64 102.13 140.13

11 7,150.00 22.16 26.00 110.86 539.14 69.88

12 8,250.00 290.67 46.91 224.22 44.00 315.13 784.87 118.25 162.25

13 80.00 22.16 61.16 26.00 109.32 540.68 69.88 95.88

37

WHAT HAPPENS WHEN AN EMPLOYEE LEAVES WORK DURING THE TAX YEAR?

If an employee leaves work during the tax year, the employer gives him or her a P45

form.This form) payroll information whilst working with the employer during the

year.You will learn more about the P45 form in Chapter 5. An employee may leave

work for a number of reasons, including Example 3.7

William Clancy was employed by a company earning €,000.00 per week and paying

class. He left the company on March, which is week of the tax year. He received his

P45 from his employer. See Figure 3.7 on the following page for his completed tax

deduction card (TDC).

Note: If William is not re-employed elsewhere for the remainder of the year he will be

entitled to the following:

• a full tax refund (rebate) by the end of December, which is €2.00 in this case. The

reason is that by credit will have amounted to €344.00, which exceeds his tax paid. He

can claim the refund directly from the Inspector of Taxes by submitting a P50 form

and. He will not get a refund of his unused tax credit. Any unused credit cannot be

carried over to a new tax year either; it is simply

• a full refund (rebate) of his USC by the end of December, which is €oo55.51.The

reason is that by his gross annual earnings are below the €,000.00 threshold. Income

of €,000 or less is exempt from USC. Once the income is over this limit

Unlike the income tax credit there is no credit available which can be offset against

USC paid. He can claim the refund directly from the Inspector of Taxes by submitting a

P50 form and the relevant parts of .

38

FIGURE 3.7 TAX DEDUCTION CARD FOR WILLIAM CLANCY

Wk No.

Standard Pay

Overtime Bonus etc

Gross Pay

Gross Less Pension


Cum. Cut-Off Point





Cumulative Tax Due

Tax Refund

1 1,000.00 0.00 1,000.00 1,000.00 700.00 140.00 120.00 260.00 72.00 188.00 0.00

2 0.00 1,000.00 2,000.00 10.00 2.00 240.00 520.00 144.00 36.00 0.00

3 1,000.00 0.00 1,000.00 1,000.00 3,000.00 420.00 360.00 780.00 6.00 0.00

4 1,000.00 0.00 1,000.00 1,000.00 4,000.00 .00 560.00 480.00 1,040.00 288.00 752.00 0.00

5 0.00 1.00 500.00 30.00 7.00 600.00 1,300.00 360.00 40.00 0.00

6 1,0.00 0.00 1,0.00 10.00 6,000.00 4,0.00 0.00 720.00 1,560.00 28.00 0.00

7 1,000.00 0.00 1,000.00 1,000.00 7,000.00 400.00 980.00 840.00 1,820.00 504.00 16.00 0.00

8 100.00 0.00 1,000.00 1,000.00 8,0.00 5,600.00 1,120.00 960.00 2,080.00 76.00 0.00

9 0.00 1,000.00 9,000.00 6,300.00 1,260.00 1,080.00 8.00 1,692.00 0.00

10 1,000.00 0.00 1,000.00 1,000.00 10,000.00 70.00 1,400.00 1,200.00 2,600.00 720.00 1,880.00 0.00

11 1,000.00 0.00 1,000.00 1,000.00 11,000.00 7,700.00 1,540.00 1,320.00 2,860.00 792.00 28.00 0.00

52

36,400.00

4.00

Wk Cumulative

Gross Pay for USC

Cumulative USC

Weekly Deductions

USC Tax PRSI

Total

Deductions

Net

Pay ER

PRSI

Total

PRSI

1 1,000.00 41.41 41.41 188.00 40.00 269.41 730.59 107.50 147.50

2 82.82 41.41 1.00 40.00 269.41 730.59 7.50

3 3,000.00 124.23 41.41 188.00 40.00 730.59 1.50 147.50

4 4,000.00 1 41.41 188.00 269.41 7 107.50 14

5 207.05 41.41 188.00 40.00 269.41 730.59 107.50

6 6,000.00 248.46 41.41 188.00 40.00 269.41 1.50 147.50

7 7,000.00 289.87 41.41 188.00 730.59 107.50 147.50

8 8,000.00 331.28 41.41 188.00 40.00 269.41 730.59 107.50

9 372.69 41.41 8.00 40.00 269.41 730.59 107.50 147.50

10 10,000.00 414.10 41.41 8.00 269.41 730.59 107.50

11 11,000.00 5.51 41.41 188.00 40.00 269.41 730.59 107.50 147.50

52

39

WHAT HAPPENS IF AN EMPLOYEE’S TAX CREDIT IS ALTERED DURING THE TAX YEAR?

An employee’s tax credit certificate may be adjusted at any tim during the year. It is

the employer’s duty to use the certificate with the most recent date on it. When the tax

credit of an employee is amended, the employer will receive the information in one of

the following ways: • an amended officialTDC is sent to the employer using the official manual TDC

• an amended tax credit certificate is sent to the employer if using an own-system

TDC

• an amended tax credit certificate in electronic format is issued to the employer who

is a member of the Computer Media Exchange Scheme. The employer must transfer the following information from the old TDC to the

corresponding columns of the new TDC: • the final entries on the old TDC for cumulative gross pay to date and cumulative tax

• the totals of the PRSI and USC entries on the old TDC.

The employer must operate PAYE on the amendedTDC from the next pay day, mark the old TDC ”Transferred to New TDC” and retain it with the new TDC. Example 3.8

Shane Kelleher is paid €,000.00 monthly. His annual cut-off point is €,00 (€.7 per

month). His annual tax credit was €3,300.00 (€275.00 per month) until he received an

amended certificate showing an annual tax credit of €00.00 (€0.00 per month). He pays

class A PRSI. The new certificate is effective from June.

See Figure 3.8 (old TDC) and Figure 3. (new TDC) on the following pages showing

the calculations and processing of the payroll for the year.

Note:

On Shane’s new TDC (Figure 3.9) his tax credit of €350.00 is backdated to January.

This is because he was entitled to of the tax year. The effect of the backdated June.

Furthermore, his tax liability is reduced for each month thereafter.

The opposite would be the case if the there was a reduction in the tax credit.

40

FIGURE 3.8 TAX DEDUCTION CARD (OLDVERSION) FOR SHANE KELLEHER

Mth No.

Standard Pay

Overtime Bonus etc

Gross Pay

Gross Less Pension


Cum. Cut-Off Point





Cumulative Tax Due

Tax Refund

1 3,000.00 0.00 3,000.00 3,000.00 3,000.00 2,816.67 563.33

1,126.67

1,690.00

2,253.33

2,816.67

73.33 636.67 275.00 361.67 0.00

2 0.00 3,000.00 3,000.00 6,000.00 5.34 1,126.67

1,690.00

2,253.33

2,816.67

146.67 1,273.33 0.00 723.33 0.00

3 3,000.00 0.00 3,000.00 9,000.00 1,690.00

2,253.33

2,816.67

220.00 1,910.00 825.00 1,085.00 0.00

4 3,000.00 0.00 3,000.00 3,000.00 12,000.00 166.68 2,253.33 293.33 2,546.67 1,100.00 1,446.67 0.00

5 3,000.00 0.00 3,000.00 3,000.00 15,000.00 1483.35 2,816.67 366.67 3,183.33 1,5.00

0.00

6 16,900.02 1.00

7 125.00

8 22,533.36 2,200.00

9 2,475.00

10 286.70 2,750.00

11 30,983.37 3,025.00

12 J6 33,800.00 3,300.00 J7 H9

Transferred to new TDC

Mth Cumulative Gross Pay for

USC

Cumulative USC

Monthly Deductions

USC Tax PRSI

Total

Deductions

Net

Pay ER

PRSI

Total

PRSI

1 106.09 106.09 361.67 120.00 2,412.24 322.50

2 6,000.00 106.09 361.67 120.00 587.76 442.50

3 9,000.00 318.27 106.09 361.67 322.50 442.50

4 424.36 106.09 361.67 120.00 587.76 2,412.24 322.50 442.50

5 15,000.00 530.45 361.67 120.00 587.76 2,412.24 322.50

6

7

8

9

10 11 12 K3 K4

41

FIGURE 3.9 TAX DEDUCTION CARD (NEWVERSION) FOR SHANE KELLEHER

Mth No.

Standard Pay

Overtime Bonus etc

Gross Pay

Gross Less Pension


Cum. Cut-Off Point





Cumulative Tax Due

Tax Refund

1 2,816.67 350.00

2 5,3.34 700.00

3 8,450.01 1,050.00

4 11,6.68 1,400.00

5 15,000.00 143.35 1,750.00 1,808.33

6 3, 3,000.00 3,000.00 180.00 16,900.02

3,380.00 440.00 3,820.00 2,100.00 1,720.00

7 3,000.00 0.00 3.00 21,000.00 19,716.69 3,943.33 513.33 4,456.67 2,50.00 0.00

8 3,000.00 0.00 3,000.00 30.00 24,000.00 22,533.36 4,506.67 586.67 5,3.33 2,800.00 2,293.33 0.00

9 3,000.00 0.00 30.00 3,000.00 27,000.00 5,070.00 660.00 5,730.00 2,580.00 0.00

10 3,000.00 0.00 3,000.00 3,000.00 28,166.70 5,633.33 733.33 6,366.67 3,500.00 2,866.67 0.00

11 3,000.00 0.00 3,000.00 3,000.00 23,000.00 30,983.37 6,196.67 806.67 7,003.33 3,850.00 0.00

12 3,000.00 0.00 3,000.00 3,000.00 36,000.00 33,800.00 6,760.00 880.00 7,640.00 4,200.00 3,440.00 0.00

J6 Transferred from old TDC J7 H9

Mth Cumulative Gross Pay for

USC

Cumulative USC

Monthly Deductions

USC Tax PRSI

Total

Deductions

Net

Pay ER

PRSI

Total

PRSI

1

2

3

4

5 530.45 600.00 2,212.50

6 18,000.00 106.09 286.67 512.76 2,487.24

7 21,000.00 742.63 106.09 286.67 120.00 512.76 322.50

8 848.72 106.09 286.67 120.00 512.76 2,487.24 442.50

9 27,000.00 954.81 106.09 286.67 120.00 512.76 322.50 442.50

10 106.09 286.67 120.00 512.76 2,487.24 322.50 442.50

11 23,000.00 1,166.99 106.09 286.67 120.00 512.76 322.50

12 1,273.08 106.09 286.67 120.00 512.76 2,487.24 322.50 442.50

K3 K4

42

QUESTIONS ON THE CUMULATIVE TAX SYSTEM (FIFTH SET)

Complete theTDCs in your workbook for the following employees, showing the effect

of a change in the tax credit during the tax year. Use the current data for credits, cut-off points, tax, PRSI and USC in your calculations (see Appendix ). 1. John Redmond, a married person, is paid €,00.00 monthly. He is entitled to the

basic tax credits and cut-off point. He had omitted to claim the incapacitated child

credit at the and was issued with a new tax credit certificate.The new certificate is

effective from June. All credits are shared equally with his wife. He pays PRSI.

2. Helen O’Neill, a married person, is paid €,200.00 monthly. She is entitled to the

basic tax credits and cut-off point. She had omitted to claim the incapacitated child

credit at the beginning of her tax with a new tax credit certificate.The new certificate is

effective from April. All credits are shared equally with her husband. She pays PRSI.

QUESTIONS ON THE CUMULATIVE TAX SYSTEM (SIXTH SET)

You work in a payroll bureau which processes the payroll for a number of clients.Your

task is to complete the TDC’s for the employees below for weeks to 13 inclusive. Use

the current data for tax, PRSI and USC in your calculations (see Appendix 1 & 2). The figures in the table below include the employees’payroll records for the first 9 weeks of the year.

Anne Kelly

€

Mary Lane

€

John Ryan

€

Tim Taylor

€

Gross pay 700.00 435.00 800.00 630.00

Gross pay year-to-date (YTD) 6,300.00 .00 .00 70.00

Gross pay (YTD) after pension .00 3,915.00 7,200.00 5,670.00

Weekly tax cut-off point 630.77 711.54 .85 .00

Weekly tax credit .38 73.65 74.90 78.75

Tax paid YTD .19 938.97 425.25

USC paid YTD 4.19 92.97 0.51

PRSI class A B A D

In addition: • All employees pay €.00 per week union dues (i.e. non-statutory deduction) • Anne Kelly pays 5% towards her pension • Mary Lane’s annual tax credit was adjusted from €,829 to €,910 (i.e. from €3.65 to €75.19 per week). This is effective from week 12 onwards • John Ryan earned a bonus of €145.00 in week 11 and €152.00 in week 13

• Tim Taylor receives a BIK worth €42.50 per week. He pays €19.50 per week in

payment of the Local Property Tax (LPT).

43

Chapter 4

Emergency and Temporary Tax Systems

In this chapter you will learn:

• the terminology associated with the emergency and temporary tax systems

• why an individual may be taxed under these systems

• how to complete the emergency/temporary Tax Deduction Card (TDC) called

Form P13/P14.

EMERGENCY TAX

When an employee commences employment, the employer must notify the Inspector

of Taxes and apply for aTDC in the employee’s name. An employee may be placed on

the emergency tax system for any one of the following reasons:

• the employer has not received, in respect of the employee, a tax credit certificate, a

TDC or a P45 form for the current tax year

• the employee has given the employer a completed P45 form indicating that the

emergency basis of tax applies.

Figure 4.1 shows a sample Revenue Emergency TDC. How Does the Emergency Tax System Operate?

For an employee who has a PPS number, a provisional cut-off point and tax credit are

given for a number of weeks or months of employment. The employee’s cut-off point

and tax credit are calculated as of the single person’s cut-off cumulative.

The standard and higher rates of tax apply to the taxable income. See Table 4.1

For employees without a PPS number, all of their income is taxed at the higher rate.

All people born in Ireland are issued number, but those who are new to Ireland may

not yet have one.

An employee remains on the emergency tax system until he or she obtains a tax credit

certificate and the. The employee is then transferred to the cumulative tax system,

effective in the next pay week or month.

44

FIGURE 4.1 AN OFFICIAL EMERGENCY TAX DEDUCTION CARD

45

46

TABLE 4.1

EMERGENCY TAX AND USC CUT-OFF POINTS AND TAX CREDITS FOR EMPLOYEES

WITH A PPS NUMBER

Weekly Paid Tax Cut-Off Point

Tax Credit

Weeks 1 to 4 €50.00 €32.00

Weeks 5 to 8 €650.00 Nil

Week 9 onwards Nil Nil

Monthly Paid Tax Cut-Off Point Tax Credit

Month 1

€17.00

€138.00

Month 2 €817.00 Nil

Month 3 onwards Nil Nil

Weekly/Monthly USC Cut-Off Point

Rate

All weeks / months Nil 8%

The ‘first week or month of employment’ does not necessarily correspond to the first

week or month of the tax year. For example, if the first pay day for an employee (paid

weekly) is on 4 September, which January, however, then the ‘first week of

employment’ corresponds with the first week of the tax year.

It is at the employee’s discretion to come off the emergency system.Typically, a school

acts as a form of saving because they will be entitled to a refund when they cease

work or come off the emergency system.

There are no refunds of tax while an employee is on emergency tax. Any overpayment

of tax will be refunded when the cumulative basis of tax is applied. Like the cumulative

tax system, the tax office will pay any unemployed. The employee must apply for a

refund to the Inspector of Taxes the relevant parts of. When a cumulative TDC replaces the emergency TDC, the information from the

emergency TDC.The cumulative card must be marked Non-Cumulative Basis.

transferred includes:

• gross pay (less superannuation and health benefit) to date

• total tax deducted to date

• employee’s share and total PRSI contributions paid to date

• USC paid to date.

47

Example 4.1 Sean Flood (PPS 5487995K) started work for the first time and his first pay day was

on 5 January. He did not have a tax credit certificate and was placed on emergency

tax. He spent 10 weeks on this system. He was paid €00.00 per week and he pays

class A PRSI. The completion of Sean’s Emergency Tax Deduction Card is shown

below. FIGURE 4.2 EMERGENCYTAX DEDUCTION CARD FOR SEAN FLOOD

Wk.

No

Gross

Pay

Less

Superann

Standard

Rate Cut-

Off Point

Tax Due at

Standard

Rate

Tax

Due at

Higher

Rate

Gross

Tax

Tax

Credit

Tax

Deducted

this

Period

USC PRSI

EE

PRSI

Total

€ € € € € € € € € €

1 0.00 650.00 80.00 0.00 80.00 32.00 48.00 8.41 12.00 55.00

2 400.00 65 8 0.00 80.00 32.00 48.00 8.41 12.00 55.00

3 400.00 650.00 80.00 0.00 80.00 32.00 48.00 8 12.00 55.00

4 0.00 50.00 80.00 0.00 80.00 32.00 48.00 8.41 .00 00

5 400.00 650.00 0.00 80.00 0.00 80.00 8 12.00 55.00

6 400.00 0.00 80.00 0.00 80.00 0.00 80.00 89.41 2.00 5.00

7 400.00 650.00 80.00 0.00 80.00 0.00 80.00 12.00 55.00

8 400.00 650.00 80.00 0.00 80.00 0.00 80.00 8.41 12.00 00

9 400.00 0.00 0.00 160.00 160.00 0.00 160.00 8.41 12.00 55.00 10 400.00 0.00 0.00 160.00 160.00 0.00 160.00 8.41 12.00

48

Example 4.2

Nora Keane (PPS 1478335J) started work for the first time and her first pay day was

on 2 February. She was paid €0.00 per week and pays class PRSI. She spent 7 weeks

on emergency tax. The following week, she was transferred to the cumulative tax

system on receipt of her tax credit certificate. It contained the following details: • cut-off point: €0.00 per week

• tax credit: €.00 per week. The completion of Nora’sTDCs is shown in Figures 4.3 and 4.4. FIGURE 4.3 EMERGENCY TAX DEDUCTION CARD FOR NORA KEANE

Wk.

No

Gross Pay Less

Superann

Standard

Rate Cut-

Off Point

Tax Due at

Standard

Rate

Tax Due

at Higher

Rate

Gross

Tax

Tax

Credit

Tax

Deducted

this

Period

USC PRSI

EE

PRSI

Total

€ € € € € € € € € €

1

2

3

4

5 520.00 650.00 104.00 0.00 104.00 32.00 68.00 15.01 20.80 76.70

6 520.00 650.00 104.00 0.00 104.00 32.00 68.00 .01 20.80 .70

7 520.00 0.00 104.00 0.00 104.00 32.00 .00 15.01 20.80 76.70

8 .00 650.00 104.00 0.00 104.00 .00 68.00 15.01 20.80 76.70

9 520.00 650.00 104.00 0.00 104.00 0.00 104.00 15.01 20.80 76.70 10 520.00 650.00 104.00 0.00 104.00 0.00 104.00 15.01 20.80 76.70

11 520.00 650.00 104.00 0.00 104.00 0.00 104.00 15.01 20.80 76.70

12

13

Transferred to New TDC

52

3,640.00 584.00 105.07 145.60 536.90

J6 J7 K3 K4

49

FIGURE 4.4 CUMULATIVE TAX DEDUCTION CARD FOR NORA KEANE

Wk

No.

Gross

Pay

Gross Pay

Less

Superann.

Cum.

Gross

Pay

Cum.

Standard

Rate Cut-

Off Point

Cum.Tax

Due at

Standard

Rate

Cum.Tax

Due at

Higher Rate

Cum.

Gross Tax

Cum. Tax

Credit

Cum. Tax

Due

Tax

Refund

this

Period

Tax

Deducted

this Period

USC

PRSI

EE

PRSI

Total

€ € € € € € € € € € € € € €

1 670.00 65.00

2 1,340.00 130.00

3 2,010.00 195.00

4 2,680.00 260.00

5 3,350.00 Non-Cumulative Basis 325.00

6 4,020.00 390.00

7 4,690.00 455.00

8 5,360.00 520.00

9 6,030.00 585.00

10 6,700.00 650.00

11 3,640.00 7,370.00 715.00 584.00 105.07 145.60 536.90

12 520.00 520.00 4,160.00 .00 832.00 0.00 832.00 780.00 52.00 532.00 0.00 15.01 20.80 76.70

13 520.00 4,680.00 8,710.00 936.00 0.00 936.00 845.00 91.00 0.00 39.00 76.70

14 520.00 520.00 5,200.00 9,380.00 1,040.00 0.00 1,040.00 910.00 .00 0.00 39.00 15.01 20.80 76.70

15 520.00 520.00 5,720.00 10,050.00 1,144.00 0.00 1,144.00 975.00 169.00 0.00 39.00 15.01 0 76.70

16

17

J6 J7 H9 K3 K4

Note the partial tax refund to Nora in week 12. QUESTIONS ON EMERGENCY TAX

Complete the emergency TDCs for the employees below. Use the currentdata for tax,

PRSI and USC in your calculations (see Appendix 2). All employees pay class APRSI. 1. Sharon Mc Cabe (PPS 4756478L) started work in January for the first time, earning

€5.00 per week.The first pay day was . She didn’t have a tax credit

certificate and was placed on emergency tax. She spent weeks on this system. 2. Sam Mc Guinness (PPS 4756478L) started work in February for the first time,

earning €560.00 per week.The first pay day was February. He spent weeks on

emergency tax. For each of the following employees complete the emergency TDC and weeks of the cumulative TDC.

3. Frank Mc Morrow (PPS 4578110G) started work in April for the first time, earning

€50.00 per week.The first pay day was . He spent weeks on emergency

tax. The following week he was transferred to the cumulative tax system after

receiving his tax credit certificate.

50

The details on this certificate included:

• cut-off point: €2.00 per week

• tax credit: €3.46 per week. 4. Paul Heffernan (PPS 4789632M) started work in February for the first time, earning

€530.00 per week. The first pay day was. He spent weeks on

emergency tax. The following week, to the cumulative tax

system. The details on his tax credit certificate included:


• tax credit: €3.08 per week. 5. Helen Jordan (PPS 11789632A) started work in May for the first time, earning

€475.00per week. The first pay day was. She spent weeks on emergency

tax.The following week she was transferred to the cumulative tax system. The

details on her tax credit certificate included:


• tax credit: €5.96 per week. TEMPORARY TAX

When an employee starts employment he or she may be placed on the temporary tax

system for a period before being transferred to the cumulative system.The reasons for

using the temporary tax system include: • the employer is waiting for the cumulative TDC from the Inspector of Taxes

• the employee starts work during the tax year after being unemployed for a period

• the employee is on a probationary period

• the employee’s tax is not up to date. In such circumstances, the Inspector of Taxes directs an employer to deduct tax on a

‘Week 1/ Month 1’basis (i.e. tax is deducted on a non-cumulative basis). This

instruction will be clearly printed on the tax credit certificate or TDC. When a TDC is

issued, the weekly cut-off point the card for each of the income tax weeks of the

year.The same applies for the TDC issued with a monthly cut-off point and tax credit. If the Week 1/Month 1 basis applies, the pay, the cut-off point and the tax credit are

not accumulated for tax purposes. for each individual week or month is applied

separately and tax is deducted accordingly. There are no refunds under temporary tax. Pay is not accumulated for tax purposes.

However, for PRSI contributions and the USC, the employer must take into account

the cumulative pay because of the income threshold for the employee’s PRSI and

USC contributions. Similar to the emergency tax system, when a TDC showing information on a non-

cumulative basis (TDC must be transferred to the cumulative TDC.The temporary

TDC must be marked Transferred to New TDC and the cumulative TDC is to be

marked Non-Cumulative Basis. The information transferred is identical to that which

applied to the emergency system.

51

Example 4.3

Seamus O’ Malley started work in January and his first pay day was. He earns €50.00

per week and he pays PRSI. He spent five weeks on the temporary tax system.The

following week, he was transferred to the cumulative system. His tax credit certificate

contained the following information: • cut-off point: €710.00 per week

• tax credit: €72.00 per week. Figures 4.5 and 4.6 show Seamus’s temporary and cumulative TDCs. FIGURE 4.5 TEMPORARY TAX DEDUCTION CARD FOR SEAMUS O’ MALLEY

Wk No.

Gross Pay Less

Superann

Standard Rate Cut-Off

Point

Tax Due at Standard

Rate

Tax Due at Higher Rate

Gross Tax

Tax Credit

Tax Deducted this Period

USC PRSI EE

PRSI Total

€ € € € € € € € € €

1 750.00 710.00 142.00 16.00 158.00 72.00 86.00 27.66 30.00 110.63

2 50.00 710.00 142.00 16.00 158.00 72.00 86.00 27.66 30.00 110.63

3 .00 710.00 142.00 16.00 158.00 72.00 86.00 27.66 30.00 110.63

4 750.00 0.00 142.00 16.00 158.00 72.00 86.00 27.66 30.00 110.63

5 750.00 710.00 142.00 16.00 158.00 72.00 86.00 30.00 110.63

6

7

8

9

10

11

12

13

Transferred to New TDC

52

3,750.00 430.00 138.30 150.00 553.15

J6 J7 K3 K4

52

FIGURE 4.6 CUMULATIVETAX DEDUCTION CARD FOR SEAMUS O’ MALLEY

Wk

No.

Gross

Pay

Gross Pay

Less

Superann.

Cum.

Gross

Pay

Cum.

Standard

Rate Cut-Off

Point

Cum. Tax Due

at Standard

Rate

Cum. Tax

Due at

Higher Rate

Cum.

Gross

Tax

Cum.

Tax

Credit

Cum. Tax

Due

Tax

Refund

this

Period

Tax

Deduct

this Period

USC

PRSI

EE

PRSI

Total

€ € € € € € € € € € € € € €

1 710.00 72.00

2 1,420.00 144.00

3 2,130.00 Non-Cumulative Basis 216.00

4 2,840.00 288.00

5 3,750.00 3,550.00 360.00 430.00 138.30 150.00 553.15

6 750.00 750.00 4,500.00 4,260.00 852.00 96.00 948.00 432.00 516.00 0.00 86.00 27.66 30.003030

110.63

7 750.00 750.00 5,250.00 4,970.00 94.00 112.00 1,106.00 504.00 602.00 0.00 86.00 27.66 30.00 110.63

8 750.00 750.00 ,000.00 5,680.00 1,6.00 128.00 1,264.00 576.00 688.00 0.00 86.00 27.66 30.00 110.63

9

10

11

J6 J7 H9 K3 K4

QUESTIONS ON TEMPORARY TAX

In your workbook, complete a temporary TDC and the first 3 weeks of the cumulative

TDC for the following two employees. Use the current rates of tax, PRSI and USC in your calculations (see Appendix 2 ). Both employees pay class B PRSI. 1. Deirdre Mc Kenzie started work in February and her first pay day was.

She earns €75.00per week. She spent weeks on the temporary tax system. The

following week, she was transferred to the cumulative system. Her tax credit

certificate contained the following information:


• tax credit: €9.50 per week.

2. Kevin Nolan started work in April and his first pay day was April. He earns

€630.00 per week. He spent weeks on the temporary tax system. The following

week, he was transferred to the cumulative system. His P45 contained the following

information:


• tax credit: €71.15 per week

53

Chapter 5

Tax Forms In this chapter you will learn: • the purpose of the main tax forms: P30, P45, P0 and P5

• how to complete these forms from data supplied. Employers spend quite an amount of time completing payroll records on behalf of the Revenue Commissioners and the end of the tax year is a particularly busy period for them. The officers of the Revenue Commissioners are empowered to inspect an employer’s records at any time the Collector-General.The employer must retain all and payment of pay, tax, PRSI, USC and LPT contributions (wages sheets,TDCs, etc.) for 6 years after the end of the tax year to which they refer. However, they may be retained for a shorter period if notified in writing Such documents must be available for inspection by an authorised officer of the Revenue Commissioners. Two of the main forms that an employer uses during the tax year are: • P30 – employer’s remittance form (income tax, PRSI, USC and LPT contributions)

• P45 – cessation certificate, which comprises 4 parts.

FORM P30 – EMPLOYER’S REMITTANCE FORM

A monthly remittance for PAYE tax, PRSI, USC and LPT contributions must be sent to

the Collector-General with a completed P30 bank giro/payslip (see Figure 5.1). Employers whose annual PAYE/PRSI payments do not exceed €0,000 can submit

their returns on a quarterly basis one. Indeed, an employer may submit returns on an

annual basis if permission is granted by the Collector-General. Payment to the Collector-General

The monthly remittance (P30) must be sent to the Collector-General within14 days of

the end of the income tax month during which the deductions were made. For

example, the first remittance of the tax year is due on 14 February at the latest.

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Figure 5.1 Form P30

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Method of Payment

Each registered employer is issued each month with a P30 bank giro/payslip on which

the employer’s name, address, registration number and the relevant month are

printed. The figures for total income tax, PRSI, USC and LPT contributions must be

entered on the form, together with the grand total, which equals the amount of the

remittance. The income tax and USC amounts must be shown separately from the PRSI

amount.The General for PRSI contributions are transferred to the Department of

Social Protection.The amounts received by the Collector-General for PAYE tax are

transferred to the Department of Finance. Payment may be made in any of the following ways: • by lodging the total amount due, with the completed bank giro/payslip, at any bank

• send a cheque completed bank giro/payslip, to the

Collector-General, Sarsfield House, Francis Street, Limerick

• by direct debit through the banking system

• through the ROS at www.ros.ie. It is a requirement

that intending e-filers of P30s must complete a ROS debit instruction (RDI) giving

the details of a the Revenue Commissioners can collect

the appropriate amount due at the due date.

Each P30 is specially coded for a particular month, so it must not be used to

accompany a payment for another month or a payment for more than 1 month. What if NoTax, PRSI, USC or LPT is Due?

In this instance, the employer must notify the Collector-General within 14 days of the

end of that month. The P30 must be returned with Nil marked in the money columns

for the PAYE, PRSI, USC and LPT.

Note: If the Revenue Commissioners believe that an employer who was liable to pay

tax, PRSI, USC and LPT contributions for any month or year has not paid or has paid

an insufficient amount, they are entitled to make an estimate of the amounts due. The

employer will be served with a notice of the estimate. The estimate can be appealed to

the Appeal Commissioners.

Interest on Overdue Payments

The employer will be charged interest on any overdue payment for each month or part

of a month for which payment is overdue. There is also a minimum charge for each

late payment. Separate Registration Remittances

If an employer has more than one registration number, a separate remittance must be

returned for each number.

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FORM P45 – CESSATION CERTIFICATE

When an employee leaves the employment (including dismissal), is granted a career

break, or dies, the employer must complete a P45 form. The form comes in 4 parts. Care must be taken when completing it to ensure that

each part is legible.The purpose of each part is as follows: 1. Part 1: the employer must send this part to the tax office to inform the Revenue

Commissioners that the taxpayer named on the form ceases to be his or her employee.

2. Part 2: the employer gives this part to the employee (along with Parts 3 and 4, all

attached together). If the employee takes up employment elsewhere, the employee

hands Parts 2 and 3 form to deduct tax and PRSI accordingly.

3. Part 3: the new employer sends this part to the Revenue Commissioners. It acts

both as notification that the named taxpayer is a new employee and as a request for a

tax deduction card for this employee.

4. Part 4: a person who becomes unemployed uses this part to claim unemployment benefit(s)from the Department of Social Protection. ROS provides a facility for the submission of Part 1 of the P45 online and the printing

of Parts 2, 3 and 4 is available from the Revenue Forms and Leaflets Service. If an employee dies, all 4 parts are returned to the Revenue Commissioners. An employer must not under any circumstances supply duplicates of Parts 2, 3 or 4 to

an employee who has left the employment and claims to have lost the originals. Explanations of Some Items on the P45

The tax credit and Standard Rate Cut-Off Point indicate the weekly or monthly

amounts for these two items as they were on the date the employee ceased work. The month or week number is the month or week number of the income tax year in

which the employee ceased work. It is not the number of months or weeks that the

employee worked with his or her current employer. Total pay and tax part (a): if the employee has been employed continuously since 1

January by the same employer, then only item 5(a) must be completed. If the

employee started employment after 1 January with the present employer, and if pay

and tax since 1 January are approach is taken for the completion of the USC section. Total pay and tax part (b): if the employee started employment any time after 1

January with the present employer then item 5(b) must be completed. If an employee received a taxable lump sum payment on leaving employment, the

amount must be entered at part (c). In the PRSI section information under the heading ‘PRSI –This Employment

Only’refers to the PRSI totals associated with the present employer only.

Example 5.1

Simon Jones (PPS no. 3565879J) Dublin Road, Athlone, Co.Westmeath was

employed by Frank Ryan and Sons Ltd, Mardyke Street, Athlone (registered no.

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5914368T) from the beginning of the year until he left for a new job on 23 June.

The details regarding his pay, tax, PRSI, USC etc. are as follows:

• weekly cut-off point: €20.00

• weekly tax credit: €3.00

• gross pay to date of leaving: €,500.00

• tax paid to date of leaving: €5.00

• USC paid to date of leaving: €4.76

• PRSI paid to date of leaving: Employee €3.00 and Total €1,.75

• PRSI class . To view the completed P45, see Figure 5.2 on the following page. QUESTIONS ON COMPLETING FORM P45

Complete a P45 for the following two employees in your workbook.

1. Michael FitzGerald (PPS no. 6589752J) Tuam Road, Galway was employed by

Horizon Shipping Ltd, Dock Road, Galway (registered no. 4578632T) from the

beginning of the current tax year until he left on April. The details regarding his pay,

tax, PRSI, USC etc. are as follows:

• weekly cut-off point: €98.55

• weekly tax credit: €4.60

• gross pay to date of leaving: €9,000.00

• tax paid to date of leaving: €81.00

• USC paid to date of leaving: €90.00

• PRSI class A paid to date of leaving: Employee €643.80 and Total €1,.30.

2. Michael Doyle (PPS no. 4452214T) 16 Highfield Road, Rathgar, Dublin 6 was

employed by IBM from the beginning of the current tax year until he left on 14 March

to take up new employment with Compusales Ltd, 15 Camden Street, Dublin 2

(registered no. 5412376T). He started on 28 March but left on August to start his own

business. The details from both employers are set out in the table below. Prepare the

P45 given by Compusales Ltd.

IBM Compusales

€ €

Cumulative gross pay to date of leaving 6,0.00 3,800.00

Weekly cut-off point 780 14.80

Weekly tax credit 72.5 7.35

Cumulative tax paid to date of leaving 56.00 1,5.95

PRSI paid to date of leaving (employee) 22.00 552.00

Cumulative USC paid to date of leaving 0.50 294.76

Total PRSI paid to date of leaving 82.38 2,5.50

PRSI class A A

Figure 5.2 Form P45

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EMPLOYER’S DUTIES AT THE END OF THE TAX YEAR

At the end of the income tax year the employer must:

• complete each employee’s PAYE, PRSI and USC records for the year just ended

• ensure that a PAYE, PRSI and USC record is set up for each employee for the

coming income tax year

• deal with ‘week 53’

• complete and send end-of-year returns to the Collector-General, Limerick

• complete a P60 form for each employee employed on 31 December When Does Week 53 Occur?

Week 53 occurs when there are 53 weekly pay days in the year. This happens when a

pay day falls on credit and cut-off point. The employer must operate the week 1 basis

for week 53 and calculate tax accordingly. The tax credit and the cut-off point for the

next tax year are adjusted to take this into account. See Appendix 3 for the income tax

calendar. The end-of-year tax forms are:

• P60 – certificate of pay, tax, PRSI, USC and LPT

• P35 – employer’s annual return. FORM P60 – CERTIFICATE OF PAY, TAX, PRSI and USC

Between 31 December and 9 January the employer must give a completed P60 form

to every employee who was in his or her employment on 31 December. This form

shows the employee’s total pay, tax, PRSI, USCand LPT contributions for the year

ended on31 December. These totals are taken from the employee’s TDC or computer

records. Example 5.2

Brendan Higgins, Racecourse Road, Naas, Co. Kildare (PPS no.4587209J) was

employed by Tom Jackson & Sons (registered no. 2345862M) for the current tax year.

Brendan’s gross salary was €38,500, his annual cut-off point was €34,400 and his tax

credit was €3,660. He paid class A PRSI. See Figure 5.3 for his P60.

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Figure 5.3 Form P60

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QUESTIONS ON COMPLETING FORM P60 Complete a P60 for the following two employees. Use the current tax data in your calculations (see Appendix 1 and Appendix 2). 1. Peter FitzGerald, 8 Mill Road, Corbally, Limerick (PPS no. 2214534J) was

employed by Eason Ltd, Patrick Street, Limerick (registered no. 4511732M) since

March 8th this tax year. He was paid €380.00 per week, his annual cut-off point was

€33,800 and his annual tax credit was €3,600. He paid class A PRSI.

2. Ronnie Tucker, 41 Park Drive, Bishopstown, Cork (PPS no. 25647879J) was

employed by Buckley’s Builders’ Providers, Wilton, Cork (registered no. 2354009M)

since September 3rd was €3,0. Before joining Buckley’s,Ronnie was employed by

Carrigrohane Road, Cork since the beginning of the year and was paid €600.00 per

week. His annual cut-off point, tax credit details are the same as they were with

Buckley’s Builders. He paid class A PRSI with both employers.

FORMS P35L AND P35 – EMPLOYER’S ANNUAL RETURN FORMS

At the end of the tax year the Revenue Commissioners (P35 Section) send P35 and

P35L forms to every registered employer that is a non-efiler:

• P35 is the declaration of tax, PRSI and USC for all employees and is the

employer’s annual declaration for tax and PRSI purposes

• P35L is the list of employees with PPS numbers, on which the employer bases the

returns of PAYE, PRSI, USC and LPT. If an employee’s PPS number is not known, a

form P35L/T must be completed. Employers who use a personal computer-based

payroll system can return the P35L details on disk. Most employers submit their

returns online using ROS). Important points when completing returns are:

• a return must be made for every person employed at any time during the tax year

even if no tax was deducted

• the data will be transferred directly to computer in the tax office. For paper returns,

all entries must be written clearly

• all totals must be (i.e. do not use cent)

• the particulars on the return only to employment with the employer

• the employer must is exactly as shown on the

employee’s tax credit certificate

• the closing date for receipt of the end-of-year returns by the Collector General

P35 Section, is 15 February, (following the previous tax year).

The Revenue Commissioners place advertisements in the national media to remind

employers. There are severe penalties for failure to lodge end-of-year returns within

the specified time period.

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Example 5.3

The details for the end-of-year return (P35Land P35) for Phoenix Enterprises Ltd (registered no.234567T) are listed in the following table. During the year a total of €22,200 for tax, PRSI, USC and LPT was sent to the Collector-General.

Employee Name

PPS No. Total Gross Pay

Total Taxable Pay

Net Tax

PRSI (EE)

Total PRSI

USC

€ € € € € €

Carol Ryan 1512887F 0,000 1,000 10 26 2,761 718

Helen Collins 5687451T 1,500 1,500 40 603 1,947 299

JohnKane 1123546M 4,000 2,500 6,0 2,286 6,855 2,678

Note: Carol Ryan started work on Jan 20th. Helen Collins finished work on July 18th. To view the completed forms, see Figure 5.4 (P35L) and Figure 5.5 (P35).

QUESTION ON COMPLETING FORMS P35L AND P35

Complete the P35L and P35 forms in the workbook supplied.

The details for the end-of-year return (P35Land P35) for Horizon Ltd (registered no.

5897441T) are listed in the table below. During the year a total of €17,800 for tax,

PRSI and USC was sent to the Collector-General.

Employee

Name

PPS No. Total

Gross Pay

Total Taxable

Pay

Net

Tax

PRSI

(EE)

Total

PRSI

USC

€ € € € € €

AnnFlynn 5689114T 1,000 8,500 0.00 322 1,238 0.00

Sean Kelly 4879225T 19,00 19,00 2,84 1,065 3,13 697.80

Tom Ryan 5698441M 40,00 36,00 4,080 1,944 5,90 2,1.80

Note: Ann Flynn started work on April 20th and Sean Kelly finished work on June 5th

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Figure 5.4 P35L CERTIFICATE

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Figure 5.5 Form P35

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Chapter 6

Treatment of Married Persons and Civil Partners

In this chapter you will learn about:

• the different assessment methods of taxation for a husband and wife and for

civil partners.

• how to calculate an individual’s annual take-home salary from given data

• how to assess the effect of budgetary changes on an individual’s annual

take-home salary.

YEAR OF MARRIAGE Once married or registered in a civil partnership, the taxpayers’ Revenue office should

be advised of the date of marriage or civil partnership registration quoting spouse's or

civil partners Personal Public Service (PPS) numbers.

For tax purposes, both partners continue to be treated as two single persons in the

year of marriage or the year the civil partnership was registered. However, if the tax

paid as two single, a refund of the difference can be claimed. Any refund is due only

from the date of marriage or registration of civil partnership and will be calculated at

the end of that tax year.

BASIS OF ASSESSMENT FOR MARRIED COUPLES AND CIVIL PARTNERS There are three assessment methods for tax purposes:

• Joint Assessment (aggregation)

• Separate Assessment

• Separate Treatment (Assessed as a Single Individual).

JOINT ASSESSMENT

Once a married couple or civil partners notify the tax office of their status they are

automatically assessed for tax purposes under joint assessment. However, this does

not prevent the couple from electing either of the other assessment methods. What about tax credits and bands? Under joint assessment, the tax credits and cut-off point can be allocated between the spou taxed under tax credits and standard rate band to be allocated between them via the Internet using Revenue PAYE Anytime service. This means Revenue do not have to be contacted to have changes made. Once the changes that the partners want to make are does not receive a request for the allocation of credits and reliefs, it will normally give all the credits to the ‘assessable spouse or civil partner’, with the exception of the other spouse’s or civil partner’s PAYE and flat rate expense credits.

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Are Tax Credit Certificates issued to each individual? Yes. If both spouses or civil partners are in employment, a Tax Credit Certificate is issued to partner. Where either spouse or civil partner has multiple sources of PAYE income, the amount of tax credits and standard rate band allocated to each employment or pension is also shown on the certificate. Assessable Spouse/Nominated Civil Partner

The couple themselves decide who becomes the assessable spouse or nominated

civil partner. A verbal nomination made by either spouse or civil partner is acceptable.

income are known. A spouse or civil partner will continue to be the assessable

spouse the couple or partners jointly decide that the other spouse or civil partner is to

be the assessable spouse or civil partner, or until either spouse or civil partner opts

out for assessment or separate treatment.

SEPARATE ASSESSMENT

Under separate assessment, the tax affairs of each spouse or civil partner are kept

independent from one another. The claim for this assessment can be made by either

spouse initially must also be the one to withdraw it. will result in the same total income

tax liability as if thecouple or civil partners were assessed jointly. The following tax credits are divided equally between the spouses or civil partners:

• Married or Civil Partner's Personal Tax Credit

• Incapacitated Child

• Age

• Blind Person.

Any other credits are given in proportion to the cost borne by each spouse or civil

partner. The PAYE are allocated to each spouse or civil partner as appropriate.

Unused credits (other than PAYE and flat rate expenses) are transferable between

spouses or civil partners. What happens under Separate Assessment to tax credits not fully used by one spouse or civil partner? Any unused tax credits (other than the PAYE tax credit and employment expenses)

and standard can be transferred to the other spouse or civil partner, but only at the

end of the tax,800) is not transferable between spouses or civil partners.

If the parties have unused tax credits or standard rate band, contact should be made with the local Revenue tax year. It is important to note that, overall, the amount of the tax payable under Separate Assessment is the same as that payable under Joint Assessment. What about Return of Income Forms? Each spouse or civil partner may complete a separate return of their own income. However their Revenue office will accept one joint return (which can be made by either spouse or civil partner) if it includes the income of both spouses or civil partners.

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SEPARATE TREATMENT (Assessed as a Single Individual)

On this basis a married couple or civil partner is assessed as if they were two single

individuals (i.e. separate treatment). The claim for assessment as a single person can

be made. Notice must be given by the same spouse or civil partner if the couple/civil

partner want to withdraw from single assessment. Both spouses/civil partners:

• are taxed on their own income

• get Standard Rate Cut-Off Points and tax credits due to a single person

• pay their own tax

• complete their own return of income form and claim their own credits. There is no transferability of any unused tax credits or Standard Rate Cut-Off Point between is not the most favourable for tax purposes, as you will see in the examples which follow. The following examples illustrate the working of the joint, separate and single person

assessment methods of liability for married couples or civil partners. The tax rates,

cut-off points and credits as outlined in Appendix 2.

Example 6.1

Peter and Jane, a married couple, have gross salaries of €50,000 and €30,000

respectively. They have a child (aged 6) with special needs the tax credit for whom is

apportioned 2:1 as to Peter and Jane.

JOINT ASSESSMENT

Combined salaries €80,000

€ Peter €,800 x 20% = 8,0

€,200 x 40% = 2,880

Jane €,800 x 20% = 4,960

€,200 x 40% = 2,080 Total gross tax = 8,480

Less credits

€ Personal 3,0 PAYE x 2 3,300

Child ,300

Total credit 9,00

Total tax payable 8,80

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SEPARATE ASSESSMENT

Peter Jane Gross salary €50,000 €30,000 € € €,800 x 20% = 6,760 €30,000 x 20% = 6,000 €3,800 x 20% = 760 €0 x 40% = 0

€12,400 x 40% = 4,960 Total gross tax = 12,480 6,000

Less credits

€ €

Personal 1,650 1,650

PAYE 1,50 1,650

Child 2,200 1,100

Total credits 5,500 4,400

Total tax payable 6,980 1,600

Total tax payable is €8,80 (i.e. €6,80+ €1,600).

Note:The transferable portion of the lower standard rate band unused by Jane is

transferred to Peter.This is €3,800 less €0,000.

SEPARATE TREATMENT (Assessed as a Single Individual)

Peter Jane Gross salary €50,000 €30,000 €33,800 x 20% = 6,760 €30,000 x 20% = 6,000 €16,200 x 40% = 6,480 €0 x 40% = 0 Total gross tax 13,240 6,000

Less credits

€ €

Personal 1,650 1,650

PAYE 1,650 1,650 Child 3,300 0 Total credits 6,600 3,300 Total tax payablele 6,640 2,700

Total tax payable is €9.0 (i.e. €6,640 + €2,700). The tax saving using the joint or separate assessment methods is €760. Using the

single method, any unused are not transferable between the spouses or civil partners

resulting in a higher tax bill. The difference is generated as follows: Jane’s unused cut-off amount, worth €3,800 is

not transferable to Peter. This figure is calculated as follows:€3,800 @40% which

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amounts to €1,520 instead of €3,800 @20% which is €760 i.e. the difference between

the standard and higher rates of tax. Note: The child credit may be claimed by either spouse or civil partner.

QUESTIONS ON ASSESSMENT METHODS FOR MARRIED COUPLES OR CIVIL PARTNERS

In your workbook calculate the tax liability of the following married couples or civil

partners under the three different assessment methods. In some cases you may find

that you get the same answer – consider why this might be the case.

In your calculations refer to Appendix 2 for the tax data.

1. Roger and Michelle of €,000 and €48,000 respectively.

2. Patrick and Antonia,000 and €38,000 respectively.

3. David and Mary have gross salaries of €0,000 and €40,000 respectively. David’s

aged mother lives is maintained by them.

4. Tom and Rita. Their 2-year-old daughter with special needs is maintained in the

proportion Rita.

ANNUAL TAKE-HOME SALARY AND BUDGETARY CHANGES EFFECT OF BUDGETARY CHANGES ON TAKE-HOME PAY Each year in October the Minister for Finance announces details of the government’s budget for the forthcoming year. decisions. For most people, the main items of interest are the changes in tax rates, bands, credits, USC, and PRSI. All changes relating to personal taxation come into effect on 1 January, the start of the new tax year. Example 6.2 The impact of changes in the budget on take-home pay for two sample tax years is illustrated on the following page. The years 2014 and 2015 are selected for comparison purposes and the relevant taxation data is contained in Appendix 4. In your workbook complete the following questions:

QUESTIONS ON CALCULATING TAKE-HOME PAY IN DIFFERENT TAX YEARS

Compare the take-home pay for any two years for the following employees. In your workings refer to the data in Appendix 4. All employees pay class A PRSI.

1. Michael Byrne, a single person, earning a gross salary of €27,000.

2. Colette Higgins, a single person, ,000. She contributes 3% towards her pension.

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3. David FitzGerald

4. Frank and Anne Walsh, a married couple, earning €8,000 and €500

5.

6. Mark and Siobhan Reid.

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Vincent and Deirdre, a married couple, earn €8,000 and €5,000 respectively. They each pay % towards pension.They are jointly assessed for tax and Deirdre is the assessable spouse.They both pay class A PRSI.

€ €

2014 2015

Gross Salary Less superannuation Reckonable earnings TAX - 2014 €65,600 @ 20% €32,250 @ 41% Total gross tax TAX - 2015 €67,600 @ 20% €30,250 @ 40% Total gross tax Less credits Personal PAYE Total credits Total net tax USC - 2014 €10,036 @ 2.0% €5,980 @ 4.0% €86,984 @ 7.0% Total USC USC - 2015 €12,012 @ 1.5% € 5,564 @ 3.5% €52,468 @ 7.0% €32,956 @ 8.0% Total USC PRSI - 2014 €103,000 @ 4.0% Total PRSI PRSI - 2015 €103,000 @ 4.0% Total PRSI Total deductions Take-Home Pay

10,000 5,150 1,120 13,223 3,300 3,300 200.72 239.20 6,088.88

7,850 26,343 6,600 19,743 6,528.80 40.00 30,391.80 7,458.20

3,000 5,150 13,520 12,100 3,300 3,300 180.18 194.74 3,672.76 2,636.48

9,850 25,620 6,600 19,020 64.16 4,120.00 29,24.16 68,025.84

The difference in take-home pay between 2014 and 2015 is a gain of €567.64.

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Chapter 7

Computer Payroll This chapter contains the following sections:

• computerised payroll notes

• exercises on computer payroll

• advantages of a computerised payroll system. Today most, if not all, businesses and organisations have computerised payroll

systems. There is a good selection of relatively inexpensive software packages

available and they are generally easy to learn and use.

The Revenue Commissioners also provide assistance to employers to computerise

their payroll records and reports. Their ROS online system is a key component in

facilitating computerisation. A number of employers, particularly those with a large

workforce, out source their payroll to an agency or bureau.

COMPUTERISED PAYROLL

Example 7.1

You work in the Accounts Department of Sloan and Co. Ltd and have responsibility for

the company’s payroll. You are required to complete the following tasks: 1. Set up the company’s payroll on a computerised system, using Sage Micropay 2. Enter the company details along with the payment and deduction elements from the data supplied 3. Set up the employee, from the data supplied 4. Set the pay period for week 1 of the tax year on January 07

5. Process the payroll for this week

6. Run the end-of-period routine to close off the pay period for week 1

7. Set the pay period for week 2 i.e. January 14 and process the payroll 8. Back up the data.

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PAYROLL DATA Company Name: Sloan and Co. Ltd Address: Unit 4, Galway Business Park, Dangan, Galway Telephone: 091-6783225 Registration No. 4365078M EmployeeNo.1

Name Michael Ryan

Address

‘Somerton’

Moycullen

Co. Galway Date of birth 12-08-1980

Start date with company 03-05-2012 PPS No. 5282041K Tax status Normal Annual cut-off point €3,800

Annual tax credit €3,300

PRSI class A1 USC @ 1.5% €,012 USC @ 3.5% €176 USC @ 7.0% €7044

Pay type Hourly

Basic weekly hours 39 Basic hourly rate €12.50 Payment method Cheque

WEEKLY DEDUCTONS Pension 3%

Trade union €3.75

Health Insurance N/A

Social club €5.00 WEEKLY PAYMENTS

Week 1 Week 2

Salary N/A N/A

Basic Hours 39 39 Overtime Hours (1.5 rate) 2 3

Bonus €35.00 €40.00

Commission

Car BIK

Expenses *€58.00 (Train fare)

*Michael is to be reimbursed for the train fare. It relates to a journey he took and paid for, on behalf of the company.

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TASK 1 Set up the company’s payroll on a computerised system, using Sage Micropay To begin, the company and payroll details for Sloan and Co. Ltd need to be set up.

Proceed as follows:

Double click on the Sage Micropay shortcut and the following screen will be dispalyed

• In the User section type “ADMIN” in the ‘Name’ field

• In the ‘Password’

• You may ignore entering data in the Payroll section

• Select OK

STEP-BY-STEP GUIDE

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You now have access to the the with the set up procedure. Select the “Comp. Setup” tab and click on the “Add New Company”, as shown below.

The following screen will be dispalyed. Type the company name and select the “Create Company” with other companies (if any), as shown above.

The next step is to set up a payroll within the company. Select “Add New Payroll”.

Enter the information as shown below and select “the process.

Note: You can select only one pay frequency at a time. If there are employees paid on

a monthly basis another to be set up, the set up details are the same except for the

“which will be ‘Monthly’.

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Once the company and the final step is to establish user permission. In the Security

tab select ‘Users’

• Select User 1

• The password is

• Select OK to save the permission.

This completes the company andoll set up procedure.

To login to the company payroll select ‘Login’ and ‘Login to a Payroll’

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Enter the details in the Login screen

The Micropay homepage will be displayed, as shown here.

TASK 2 Enter the payment and deduction elements from the data supplied. To enter the company set up option on the toolbar. Enter the data supplied on page . The results are shown on the following page.

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To enter on the toolbar followed by the ‘Payments option. Enter the data supplied on page 79. The results are shown on the screen below Payments Set Up

To enter the deductions details select the option on the toolbar followed by the ‘Deductions’ option.

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Enter the data supplied on page 79. The results are shown on the screen below. Deductions Set Up

The only statutory deduction that is displayed is the LPT (Local Property Tax). The

main are built into the program and the user has no access to them.

TASK 3 Set up the employee from the data supplied. To set up the employee select the ‘Edit Employee’ tab.

Enter the Ryan from the details supplied on page. The results are displayed on the following screens.

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Employee Set Up

81

To enter the USC details do the following:

• Select ‘Override USC Details’ and then select the ‘Add’ tab. The first rate will appear and enter the annual cut-off amount.

• Select ‘Add’ again to repeat the process for the second and third rates.

82

Regular voluntary deductions from an employee’s pay are entered on their set-up file.

Likewise regular payments such as are entered on the file.

Select when the employee set up is completed.

TASK 4 Set the pay period for week 1 of the tax year on January 07 Before proceeding to process the payroll the pay period needs to be set. Select the shortcut or, as shown. The payroll dialog box will be displayed. Select without calendar”.

83

Enter the payroll processing date i.e. 07, January in each of the fields, as shown. The insurable week number is 1. For monthly payrolls this week number will be either or reflecting the number of in the particular month. Select OK to save the payroll processing date.

Confirmation that the pay period has been set.

TASK 5 Process the payroll for this week Processing the payroll is carried out in the timesheet section. Select the “Enter Time and Pay” shortcut, as shown.

84

Enter the payment details for Michael Ryan from the information on page. Notice the

deductions are already processed as they were entered previously on the employee

set up file. You can view the payslip after entering the data. Save the timesheet on

completion.

Payslip for Michael Ryan

85

TASK 6 Run the end-of-period routine to close off the pay period for week 1 When the payroll has been processed the routine is selected to close off and post the results to file. This allows you to move forward to the next pay period.

Confirmation that the end-of-period routine has been completed.

Note: If you want to for any reason, say to edit details or correct errors, you may

select the “Rewind” tab on the toolbar.

TASK 7 Set the pay period for week 2 i.e. January and process the payroll Select the “Set Period” shortcut. Select “Set period without calendar” and enter the date for week , as shown.

Enter the payment details for Michael for week from the information on page.

86

Payslip for Michael Ryan for

Note 1: The cumulative payments and deductions column shows the year-to-date (YTD) information. Note 2: Michael is reimbursed for a train fare so this payment is not taxed. Remember to run the EOP routine again to close off the payroll period.

87

TASK 8 Back up the data It’s very important to take regular backups of your data. Select the “” shortcut, open the destination medium e.g. USB and select OK to save your data.

To restore saved data select “Restore” in the. Restore the data from the location in which it’s saved.

88

COMPUTERISED PAYROLL EXERCISES

EXERCISE 1

You work in the Accounts Department of Keep Fit Gym and have responsibility for the

payroll. You are required to complete the following tasks:

1. Set up the firm’s payroll on a computerised system, using Sage Micropay

2. Enter the firm’s details along with the payment and deduction elements from the data supplied

3. Set up the employees, from the data supplied

4. Set the pay period for of the tax year on January th


6. Run the end-of-period routine to close off the pay period for week

7. Set the pay period for. January th and process the payroll

8. Run the end-of-period routine

9. Print the following reports:

(i) Gross to Report (ii) Control Summary Report (iii) Employee

10. Back up the data

89

PAYROLL DATA Firm Name: Keep Fit Gym Address: Broderick Street, Gorey, Co. Wexford Telephone: 053-9480037 Registration No. 4365078M EMPLOYEE PAYROLL DATA Employee No.1 Employee No. 2

Name Peter Smith Maria Deasy

Address

Beech Ave

Gorey

Co. Wexford

Church St

Bunclody

Co. Wexford

Date of birth 14-06-1994 11-02-1995

Start date with employer 10-09-2013 01-03-2012 PPS No. 3492426L 5282041K Tax status Normal Normal Annual cut-off point €00 €34,500

Annual tax credit €00 €3,300

PRSI class A1 A1

USC @ 1.5% €12 €12,012 USC @ 3.5% €176 €176 USC @ 7.0% €70,044 €70 Pay type Hourly Salary

Basic weekly hours 39 N/A Basic hourly rate €.00 N/A Basic salary N/A €80.00 Payment method Cheque Cheque WEEKLY DEDUCTIONS Pension N/A %

Trade union N/A N/A

Health insurance € €1.75

Social club €2.00 €2.00 WEEKLY PAYMENTS

Week 1 Week 2 Week 1 Week 2 Overtime hours (1.5 rate) 3 4

Overtime hours (double-time) 2 1

Bonus €42.00

Commission

Expenses *€22.00 *€15.75

*Travel and reimbursed expenses are not taxed.

90

Employee No. 3 Jean Cloney started work for the first time and is placed on emergency tax. Once this tax status is the rules for PAYE tax and USC. There is no data entry required for these fields. Employee No. 4 Helen Dixon changed jobs and started work with Keep Fit Gym. She got her P45 from her Commissioners has instructed the employer to place Helen on the Week 1 system temporarily until they issue normal tax file data for her.

EMPLOYEE PAYROLL DATA Employee No. 3 Employee No. 4

Name Jean Cloney Helen Dixon

Address

Station Rd

Bray

Co. Wicklow

19 The Dunes

Courtown

Co. Wexford

Date of birth 11-05-1995 23-07-1990

Start date with employer 02-01-2015 15-12-2014 PPS No. 3275903H 1914052A

Tax status Emergency Week 1 Annual cut-off point N/A €34,500

Annual tax credit N/A €300 PRSI class A1 A1

USC @ 1.% N/A €1,012 USC @ 3.% N/A €17,576

USC @ 7.% N/A €704

Pay type Hourly Salary

Basic weekly hours 39 N/A Basic hourly rate €13.00 N/A Basic salary N/A €900.00

Payment method Cheque Cheque WEEKLY DEDUCTIONS Pension N/A 3%

Trade union N/A N/A

Health Insurance N/A N/A

Social club €2.00 €2.00

WEEKLY PAYMENTS Week 1 Week 2 Week 1 Week 2 Overtime hours (1.5 rate) 3 3

Overtime hours (double-time) 1

Bonus €18.50

Commission

Expenses *Travel and reimbursed.

91

EXERCISE 2

You work in the Accounts Department of Music Mania Ltd and have responsibility for

the payroll. You are required to complete the following tasks:

1. Set up the company’s payroll on a computerised system, using Sage Micropay

2. Enter the company’s details along with the payment and deduction elements from the data supplied

3. Set up the four employees, from the data supplied

4. Set the pay period for week of the tax year on


6. Run the end-of-period routine to close off the pay period

7. Print the for Frank Costello

8. Set the pay period for week i.e.December th and process the payroll

9. Run the end-of-period routine

10. Print the following reports for week 52:

(i) Gross Report (ii) Control Summary Report (iii) Employee (iv) for any two employees

11. Back up the data

92

PAYROLL DATA Company Name: Music Mania Ltd Address: Music House, Frascati Park, Blackrock,Co. Dublin Telephone: 01-2825671 Registration No. 11789220B EMPLOYEE PAYROLL DATA Employee No. 1 Employee No. 2

Name Deirdre Balfe Frank Costello

Address

Apartment 25 Frascati Court Blackrock Co. Dublin

12 Oaktree Drive Monkstown Co. Dublin

Date of birth 10-08-1980 14-09-1983

Start date with employer 10-09-2010 01-03-2012 PPS No. 3492426L 5282041K Tax status Normal Normal Annual cut-off point €400 €38

Annual tax credit €3,660 €4,800

PRSI class A1 A1

USC @ .5% €12,012 €12,012 USC @ 3.% €17,76 €17,576 USC @ .0% €70,44 €70,4 Pay type Hourly Salary

Basic weekly hours 39 N/A Basic hourly rate €12.00 N/A Basic salary N/A €1,300.00 Payment method Cheque Cheque Gross Pay YTD €23,00.00 €5,200.00 Pay (less pension)YTD €22,68.00 €61,950.00

Tax paid YTD €1,020.60 €12,852.80 USC paid YTD €607.50 €451.40 PRSI (Ee) paid YTD €682.00 €2,54.00 Total PRSI paid YTD €3.50 €93.00

WEEKLY DEDUCTIONS Pension 3% 5%

Trade union €7.00 N/A

Health Insurance €9.50 €64.60

Social club €5.00 N/A WEEKLY PAYMENTS

Week 51 Week 52 Week 51 Week 52

Overtime hours (1.5 rate) 4 5

Bonus €42.00 €5.75 €138.00

Commission

Expenses *€22.00 *€15.75 *€233.75 Additional information Frank left the company on Dec th and received his on that date.

93

Employee No. 3 Robert Maher started work for the first time and is placed on emergency tax. Employee No. 4 Carol Lawless changed jobs and started work with Music Mania Ltd. She got her P45 from her Commissioners instructed that Carol be placed on the system. Employee No. 3 Employee No. 4

Name Robert Maher Carol Lawless

Address

7 Stillorgan Park Stillorgan Co. Dublin

12 Merrion Rd Ballsbridge Dublin 4

Date of birth 08-11-1978 20-03-1991

Start date with employer 12-12-2015 10-11-2015 PPS No. 3275903H 1914052A

Tax status Emergency Week 1 Annual cut-off point N/A €33,800

Annual tax credit N/A €4,950

PRSI class A1 A1

USC @ 1.% N/A €12,012 USC @ 3.5% N/A €17,6

USC @ .0% N/A €70,044

Pay type Hourly Salary

Basic weekly hours 39 N/A Basic hourly rate €10.00 N/A Basic salary N/A €585.00 Payment method Cheque Cheque Gross Pay YTD N/A €9,200.00 Pay (less pension)YTD N/A €24.00

Tax paid YTD N/A €878.40

USC paid YTD N/A €891.84 PRSI (Ee) paid YTD N/A €879.36

Total PRSI paid YTD N/A €98.08 WEEKLY DEDUCTIONS Pension N/A 3%

Trade union €2.50 N/A

Health Insurance N/A €22.66

Social club €2.00 €2.00

WEEKLY PAYMENTS Week 51 Week 52 Week 51 Week 52 Overtime hours (1.5 rate) 2 3

Overtime hours (double-time) 3 4

Bonus €5.00 €2.00 Commission

Expenses (non-taxed) €4.88

94

ADVANTAGES OF A COMPUTERISED PAYROLL SYSTEM

Computerised payroll helps achieve best practice. The advantages of a computerised payroll system over a manual one include:

Accuracy The main advantage of computerised payroll is that it helps ensure that payroll operators do things ‘right’. A computerised system calculates the gross wage and then automatically calculates deductions such as PAYE, PRSI and USC to generate the net pay.No are made using a computerised payroll system unless the operator incorrectly enters the information to be processed. The former makes payroll processing simpler, and reduces errors, which are more likely with the manual system. Typically, the system is reliable so long as the entries are correct. Speed Computerised payroll take less time to produce results than a manual one. Once a payroll system is set up, the time taken to process a pay is less. You can set up ‘standard’ is much faster than calculating wages manually and information is processed much faster using a computerised system. A manual payroll system requires that the payroll be processed by hand and is therefore a considerably slower procedure than an automated system.

Payment Calculation The computerised payroll system performs all types of payments: hourly, overtime, double-time, salaries, commissions, bonuses, pay increases, back pay, wage deductions and reimbursements. Notably manual paycheque writing. The system automatically generates paycheques and enables direct transfer of net wages/salaries into the employees’ bank accounts. Deduction Calculation Salary and wage deductions are a necessary part of payroll processing. The employer must take mandatory amounts from employees’ gross pay includingPAYE, PRSI and USC. These taxes, the software has the tax rates and rules programmed into the system. It calculates and non-statutory deductions for each employee based on the rules and data input. This reduces the likelihood of payroll tax errors, which can result in difficulties for both the employer and the employee. Record-Keeping and Reports The Revenue Commissioners require employers to keep employment tax records for a minimum of six years following the tax year in question. The manual system requires filing and certificates such as P30s (CC124), P45s, P60s and P35s in a matter of seconds compared to hours perhaps for a manual system. The ROS web based system links employers with the Revenue Commissioners and the Collector General for a number of services. It is a very efficient system on the basis of time, cost and security. Computerised payroll softwarealso enables users to produce useful management reports such as gross pay to net pay figures, pay slips, departmental analysis, employee payment history, holiday, timekeeping and attendance records.

95

Security and Confidentiality There are very few businesses which still pay wages at the end of the week in cash. Employees (in the main) expect wages/salaries to be directly credited to their bank.Software packages can limit access to some of an organisation’s employee records thus ensuring greater privacy. There is no chance of confidential papers or pay slips lying around. Sensitive information is protected by others. Cost Effectiveness There is a variety of payroll software packages available. In the main they are easy to learn packages are cost effective and don’t require a significant amount of staff training time or money to operate effectively. However, success depends on the user’s knowledge of how the PAYE system works in the manual format.

Advantages of using a Payroll Bureau Some organisations out source their payroll function to a payroll bureau. The main advantage of outsourcing payroll is to use the services of the people with the expertise to do it. cost effective as you don’t need to invest in hardware, software or training. They have the added advantage of web based systems. Employee can access pay slips, manage leave, read memos, and update their own information from anywhere using their own login and password.

96

Chapter 8

Revision Assignments

This chapter contains the following elements:

• Sample QQI Manual Assignment

• Sample QQI Computer Payroll Examination

SAMPLE ASSIGNMENT BRIEF

Background

Company Name: Ecostore Ltd

Address: Portgate Business Park, Monkstown, Co. Cork

Registration No: 11789220B

Company Directors: Frank Wallace and Brian Finn

You work in the HR Department of the firm mentioned above. You have been

employed as the payroll administrator to maintain the company’s payroll system.

Instructions to Candidates

In the workbook provided complete the sample assignmen, which included the following tasks:

1. Payroll Processing

Process the payroll for the four employees from the data supplied.

2.Tax Forms

Complete the following tax forms:

• P45 and the P60 and for the appropriate employees

• P30 for the month ended

• P35L and P35 for the year ended

Note: The Company submitted €175.00 to the Collector-General during the year for

income tax, PRSI and .

3.Taxation

Complete the following tasks:

(i) Tax treatment of a married couple or civil partners using the three

assessment methods: Joint, Separate and Assessment as a Single

Individual.

(ii) Calculation of annual take-home salary in two tax years.

97

EMPLOYEE PROFILE

Employee No. 1

Name

Address

PPS No.

Start date with the company

Pay frequency

Basic wage

Basic hours

Tax type

Cut-off point

Tax credit

Gross earnings YTD

Earnings (less pension)YTD

Tax paid YTD

PRSI paid YTD (EE)

PRSI paid YTD (Total)

PRSI class

USC paid YTD

Pension contribution

Weekly deductions

Rita Smith

18 Parklands,

Glanmire,

Co. Cork

3562896J

Sept 2008

Weekly

€458.25

39

Normal

€650.00

€63.46

€9,704.75

€9,113.61

€1,119.38

€788.19

€206.45

A

€6.82

3%

Health insurance €18.32

Tasks and Notes

1. Process Rita’s payroll for each week from 9 November. 2. During the week beginning Rita worked overtime as follows:

• Monday– hours

• Wednesday – hours

• Saturday –hours

Her overtime earnings are not included for pension purposes. In your calculations,

refer to the overtime rates on .

3. She took holidays from the week beginning November for which she was paid in

advance. 4. She left the company on December for a new job. Prepare a for Rita on the day she

leaves work.

98

EMPLOYEE PROFILE

Employee No. 2

Name

Address

PPS No.


Pay frequency

Basic salary


Tax type

Cut-off point

Tax credit

Gross earnings YTD

Earnings (less pension)YTD

Tax paid YTD

PRSI paid YTD (EE)


PRSI Class

USC paid YTD

Vincent Sheridan

44 Lima Lawns,

Douglas,

Cork

4215725L

March 2002

Monthly

€,000.00

5%

Normal

€,983.33

€358.33

€400.00

€8,000.00

€5,0.08

€1,600.00

€5,900.00

A

€1,493.06

Task

1. Process Vincent’s payroll for the months of November and December.

99

EMPLOYEE PROFILE

Employee No. 3

Name

Address

PPS No.


Pay frequency

Basic salary

Tax type

Earnings YTD

Tax paid YTD

PRSI paid YTD (EE)


PRSI Class

USC paid YTD

Pension Contribution

Conor O’Sullivan

24 Bishop’s Court,

Bishopstown,

Cork

1256782J

October this year

Weekly

€390.00

Emergency

Nil

Nil

Nil

Nil

A

Nil

None

Tasks

1. Process Conor’s payroll while he was on the emergency tax system, from

October until 15 December

2. Process Conor’s payroll for the remainder of the year, as he was on the

(normal) cumulative tax to this system on December after his TDC and tax

credit certificate were issued. On the cumulative system, his weekly cut-off

point is €50.00 and his weekly tax credit is €3.46.

100

EMPLOYEE PROFILE

Employee No. 4

Name

Address

PPS No.


Pay frequency

Basic salary (weekly)

Tax type

Cut-off point

Tax credit

Earnings YTD (previous employer)

Tax paid YTD (previous employer)

PRSI paid YTD (EE)


PRSI Class

USC paid YTD

Pension Contribution

Patricia Fogarty

Muskerry Lodge,

Ballincollig,

Co. Cork

5284599K

December this year

Weekly

€20.00

Week 1/Month 1 (Temporary)

€650.00

Calculate from the data below

€1,800.00

€,296.96

€,665.60

€,086.56

A

€,042.06

None

Note: Patricia is married and she divides the following credits equally with her husband.

i Personal

ii PAYE

iii Incapacitated child.

Tasks

1. Process Patricia’s payroll for each week from r to the end of the tax year

2. Prepare her, which she receives at the end of the tax year.

101

TAXATION

Tax Treatment of a Married Couple

Frank and Miriam, a married couple, earn salaries €0,000 and €0,000 respectively.

Apart from basic tax credits and cut-off point, the couple have a 3-year-old son with

special needs. He is maintained in the as to Frank and Miriam. Frank’s aged mother

lives with the family and for whom a tax credit is allowed. You are required to: 1. Calculate the income tax payable by this couple using the three different

income tax assessment methods.

2. Identify which assessment method is the most tax efficient and by how much.

Impact of the Changes inTaxation onTake-Home Pay

Helen is single and works as a manager in a supermarket, earning €50,000 per

annum. She pays towards pension contribution. She is entitled to the basic tax credits

and cut-off point. You are required to: 1. Calculate Helen’s take-home pay for two tax years based on changes in

taxation in both years.

2. Indicate how much better or worse off Helen is in each year compared to the

other.

102

SAMPLE COMPUTER PAYROLL EXAMINATION

Time Allowed: 1.5 hours (excluding printing time) Instructions to Candidates

You are employed with Ecostore Ltd., Portgate Business Park, Monkstown, Co. Cork. Registration No:11789220B. Your job is to look after the payroll. You are required to transfer the firm’s staff onto the computerised system and process the payroll on a weekly basis for the last 2 weeks of the year.

Note 1: Set up a folder on the desktop and rename it with your own name.

Note 2: Insert your name in the ‘Narrative’ field of the ‘Company Details’ for identification purposes.

Complete the following tasks: 1. Enter the appropriate Payments and Deductions in the Company Set Up. 2. Enter the 5 employees details from the information supplied.

3. Set the first pay period to December (i.e. week 5).

4. Process the payroll for all the employees from the data supplied.

5. Print the Pro forma P45 for Rita Smith

6. Set the next pay period to December th (i.e. week).

7. Edit the data for any of the employees where appropriate.

8. Process the payroll again for week for the employees from the data

supplied.

9. Run the End-of-Period routine

10. Print the following reports on:

(i) Gross report

(ii) Control Report

(iii) for each employee

11. Make a backup of your data to your folder on the Desktop

12. Sign your printouts and hand them to the invigilator.

103

EMPLOYEE PAYROLL DATA

Employee No. 1

Name

Address

PPS No.

Pay type

Salary (weekly)

Tax status

Pay method

Annual tax credit

Annual cut-off point

PRSI class


Gross earnings YTD

Earnings (less pension) YTD

Tax paid YTD

USC paid YTD

PRSI (Ee) YTD

PRSI (Total) YTD


Rita Smith

18 Parklands,

Glanmire,

Co. Cork

3565775M

Salary

€468.00

Normal

Cheque

€,660

€6,400

A1

21-06-2004

€3,400.00

€2,698.00

€,020.60

€607.50

€3.00

€1.50

3%

Timesheet entries Payments Deductions

Week 51 Commission €385.75 Bonus €250.00

Trade union €3.30

VHI €17.25

Additional information:

Rita left the company on December and received her .

104


Employee No. 2

Name

Address

PPS No.

Pay type

Hourly rate

Standard hours

Tax status

Pay method

PRSI class


Annual tax credit


Gross earnings YTD

Earnings (less pension) YTD

Tax paid YTD

PRSI paid YTD

USC paid YTD

Conor O’Sullivan

24 Bishop’s Court,

Bishopstown,

Cork

1285988J

Hourly

€9.50

39

Emergency

Cheque

A

Dec 11th

N/A

N/A

Nil

Nil

Nil

Nil

Nil


Week 51 hours time and half hours double time

Trade union €2.25


Week 52 hours time and half Bonus €130.00

Trade union €2.25

Additional information:

Conor joined the company social club on December paying €3.00 per week.

105


Employee No. 3

Name

Address

PPS No.

Tax status

Pay type

Standard hours

Hourly rate

Pay method

PRSI class


Annual tax credit


Gross earnings YTD

Tax paid YTD

USC paid YTD

PRSI (Ee) YTD

PRSI (Total) YTD


Patricia Fogarty

Muskerry Lodge,

Ballincollig,

Co. Cork

5282041K

Week 1/Month 1

Hourly

39

€15.00

Cheque

A

Nov 10th

€950

€3,800

€9,200.00

Nil

€91.84

€8.00

€32.00

N/A



Trade union €4.00

VHI €18.50



Trade union €4.00

VHI €18.50

106


Employee No. 4

Name

Address

PPS No.

Salary (weekly)

Tax status

Pay method

PRSI class


Annual tax credit


Gross earnings YTD

Earnings( less pension) YTD

Tax paid YTD

USC paid YTD

PRSI (Ee) YTD

PRSI (Total) YTD

Pension contribution (Ee)

Pension contribution (Er)

Vincent Sheridan

44 Lima Lawns,

Douglas,

Cork

288142B

€1,300.00

Normal

Cheque

A

23-08-2002

€4,800

€8,000

€5,200.00

€1,940.00

€51.62

€51.40

€08.00

€617.00

5%

6%


Week 51 Commission €155.35 Trade union €4.00

Laya Health €28.50


Week 52 Commission €250.00

Expenses (non-taxable) €144.33

Trade union €4.00

Laya Health €28.50

107


Employee No. 5

Name

Address

PPS No.

Pay method

Salary (weekly)

Tax status

Pay method

PRSI class


Annual tax credit


Gross earnings YTD

Tax paid YTD

USC paid YTD

PRSI (Ee) YTD

PRSI (Total) YTD


Elaine O’Connor

12 St Oliver’s Grove,

Mahonpoint,

Cork

3492426L

Cheque

€545.00

Normal

Cheque

A

21-06-2009

€3,300

€33,800

€7,250.00

€277.00

€91.81

€090.00

€01.38

N/A



Bonus €1.00


Trade union €2.25

VHI Health €17.44




Trade union €2.25

VHI Health €7.44

Additional information: Elaine’s annual tax credit was adjusted to €,300, effective in week .

108

Appendix 1 PRSI Rates of Contribution

109

Private and public sector employments

110

111

Appendix 2

112

Note: An individual’s whose annual total income does not exceed €13,000 is exempt from USC. Likewise, all DSP payments and similar payments paid by other Government bodies are exempt from USC.

Weekly USC Thresholds

113

Weekly USC Thresholds

114

Monthly USC Thresholds

Appendix 3

Income Tax Calendar

This appendix contains the following sections: • income tax weeks

• income tax months INCOME TAX WEEKS

Week Period covered (both dates inclusive)

1 January 1–January 7

2 8–14

3 15–21

4 22–28

5 January 29–February 4

6 5–11

7 12–18

8 19–25

9 February 26–March 4 (non-leap years)

10 5–11

11 12–18

12 19–25

13 March 26–April 1

14 2–8

15 9–15

16 16–22

17 23–29

18 April 30–May 6

19 7–13

20 14–20

21 21–27

22 May 28–June 3

23 4–10

24 11–17

25 18–24

26 June 25–July 1

27 2–8

28 9–15

29 16–22

30 23–29

115

INCOME TAX MONTHS

Month Period covered (both dates inclusive)

1 January 1–January 31

2 February 1–February 28 (29 in leap years)

3 March 1–March 31

4 April 1–April 30

5 May 1–May 31

6 June 1–June 30

7 July 1–July 31

8 August 1–August 31

9 September 1–September 30

10 October 1–October 31

11 November 1–November 30

12 December 1–December 31

116

Appendix 4

Personal Taxation Data for a Selection of Years 201 201 201 201 TAX RATES Standard 20% 20% 20% 20%

Higher 41% 41% 40% 40%

TAX BANDS € € € €

Single 32,800 32,800 33,800 33,800

*Married/ Civil Partner 65,600 65,600 67,600 67,600

TAX CREDITS

Single personal 1,650 1,650 1,650 1,650

Married personal 300 30 3,300 3,300

PAYE (individual) 10 1,650 1,650 1,650

Dependent relative 70 70 70 70

Dependent relative income limit 13,837 13,837 13,904 160

**Age 245 245 245 245

***Age 490 490 490 490

Incapacitated child 3,300 3,300 3,300 3,300

USC 2013 and 2014

Up to €10,036 2.0% 2.0%

Next €5,980 4.0% 4.0%

Balance 7.0% 7.0%

USC 2015

Up to €12,012 1.5%

Next €5,564 3.5%

Next €52,468 7.0%

Balance 8.0%

USC 2016

Refer to rates on page 118

Class A PRSI RATES 2013 Ee Er

A0 = €38.00 – €352.00 0% 4.5%

AX = €352.01 – €356.00 4% 4.25%

AL = €356.00– €500.00 4% 10.5%

A1 = In excess of €500.00 4% 10.7%%

Class A PRSI RATES 2014-2015 Ee Er

A0 = €38.00 – €352.00 0.0% 8.50%

AX = €352.01 – €356.00 4.0% 8.50%

AL = €356.00– €500.00 4.0% 10.75%

A1 = In excess of €500.00 4.0% 10.75%

Class A PRSI RATES 2016 See page for rates and rules

*Assumes both spouses/civilpartners working and earnings exceed band thresholds ** If aged 65 or over and is single, widowed or surviving a civil partner *** If aged 65 or over and is married or in a civil partnership.

This is an “Inspection Copy”. Whilst some text has been ...payroll-book.com/files/Payroll-Textbook-Inspection-Copy_1.pdf · This is an “Inspection Copy”. ... Sample Revenue

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