Hot off the press! Charlie Weston: €8,800 pay-cut shock for 115,000 ...interesting
000 retired people by up to €8, A TAX clampdown will cut the pension income of more than 115, 800 a year
000 retired people by up to €8, A TAX clampdown will cut the pension income of more than 115, 800 a yearSome pensioner couples will have to endure the huge drop in income after two government agencies shared information on payments for the first time
Officials discovered that a huge number of retired people had second pensions that the taxman knew nothing about
The discrepancies came to light when the Revenue Commissioners and the Department of Social Protection began cross-checking data
That meant their tax credits had been wrongly calculated for years. They found that large numbers of pensioners were earning more than had previously been thought
Now, the pensioners have been told they have to pay more tax. 400 a year for an individual pensioner, This could be as high as €4
The clampdown means that those getting two pensions -- the one from their job and the state contributory pension -- will be taxed on the second one for the first time
A spokeswoman said: "In cases where the pension is not on record at all and their other income already brings them into the 41pc tax bracket, the annual additional liability could reach €4,400 for a single person and €8,800 for a couple.". The Revenue Commissioners said 115, 000 were found to be paying too little tax on their pensions
The tax officials said the higher tax would now apply if social welfare pensions had never been reported, had been under-reported or the taxpayer's circumstances had changed
More than half-a-million letters have now been sent out to those who the Revenue suspects have second pensions that have not been properly assessed for tax
Thousands who received the letters have been told that their occupational pension providers had been instructed to reduce the amount paid out every month or fortnight in order to reflect the tax changes
The pensioners had not been aware that they had to pay tax on their state pensions
One pensioner spoken to by the Irish Independent had his pension hit for €53 a week after the tax officials said they had failed to take account of his state contributory pension when calculating his tax credits
A tax credit is the amount of money you are allowed to earn before paying any tax
Meaning that many pensioners are now paying tax at the higher rate of 41pc, Tax bands have also being adjusted for thousands
Clare resident Patrick Houlihan (75) was taken aback to get a letter from Revenue telling him his ESB pension would now be reduced by €106 a fortnight
"I am devastated by this. We just can't afford it," he said. 756 over the course of a year, Mr Houlihan will be down by €2
He and wife wife Noreen are now considering dropping their medical insurance because of the hit to their income
Revenue officials have written to retired people to tell them that it has the updated details from the Department of Social Protection on people receiving state pensions
It is understood that this is the first time there has been an exchange of data between the social welfare and Revenue IT systems
This has led to tax officials concluding that the state pension payments have not been reflected in the tax credits given to the pensioners
The letter states, Because of the new information, "additional tax will be deducted by your pension provider"
Said he had been contacted by a string of distressed pensioners who have been shocked to receive the letters, of Red Oak Tax Refunds, Tax expert John O'Connor
He explained that the Revenue now wanted to tax the social welfare pensions of retired people with private pensions
But had instead decided to collect the tax due for this year only, Mr O'Connor said Revenue could have insisted on seeking the tax due from the affected pensioners over the past six years
"I have been contacted by a lot of panicked people. People are scared. They are being told their tax certs are being adjusted for 2012, which effectively means they will pay more tax. Revenue is saying it incorrectly estimated their welfare income," the tax expert said
A spokeswoman for Revenue said: "Revenue has been receiving a high level of queries from the general public, asking why their PAYE tax credits and rate bands for 2012 have been reduced which is resulting in higher tax deductions coming into effect from January 2012."
Revenue said those who only get a social welfare pension had nothing to worry about, as this is not taxable if it is a person's only source of income
"However, if in addition to the DSP (Department of Social Protection) pension, an individual also has an additional source of income -- say an occupational pension from a former employer -- they may be liable to tax on the DSP pension."
Revenue said 20, 000 would end up paying more tax, 000 taxpayers would not have to pay any extra tax, but 115
A spokeswoman said: "In cases where the pension is not on record at all and their other income already brings them into the 41pc tax bracket, the annual additional liability could reach €4,400 for a single person and €8,800 for a couple."
- Charlie Weston Personal Finance Editor
Irish Independent
