The Revenue Commissioners have issued letters to pensioners regarding possible underpayment of Income Tax. Revenue officials expect to collect €45m this year in extra taxes after installing new computer systems which allow them to access data held by the Department of Social Protection.
This allowed tax details to be crosschecked with social welfare payments and highlighted about 115,000 pensioners who had underpaid their tax.
Pensioners who receive no income other than the state pension would be exempt from Income Tax. However, if the pensioner is also in receipt of a private pension or other source of income they could be liable to pay Income Tax.
The Revenue have concentrated on adjusting the tax credits for 2012 but have indicated that any back tax will be targeted on people with higher income. The tax system provides that anyone over the age of 65 where total income is less than €18,000 or a couple where income is less than €36,000 does not have to pay Income Tax. Relief is also given for medical expenses incurred.
The onus is and was on pensioners to inform the Revenue about their state pension if they were also receiving a salary on occupational pension. Some couples could have an extra €8,800 this year.
Revenue have indicated that the vast majority of the 115,000 who have been told they are under paying tax on their pensions will not have tax backdated as it would be uneconomical to chase people for small amounts.
The Revenue will target cases with large tax liabilities. Some of these people could be subject to a tax audit. This could give rise to interest and penalties added to the tax liabilities due.
It has been made clear that there will be no amnesty for those who have not been up front with the taxman. Any pensioners concerned about their tax position should as soon as possible contact us in order to address this issue.
If you have any queries on your tax liability, contact Des Lowry or Linda Scott on 049 4371211