Q: I hear the Revenue Commissioners are issuing letters to thousands of pensioners. As a retired person, should I be worried?
A: For one in four pensioners, the letter won’t bring good news. Revenue is writing to 115,000 taxpayers who are liable to pay more tax in 2012 because they did not declare their State pension, or their pension was under-reported, or because their circumstances had changed.
Q: Why are they doing this now?
A: Revenue’s action is taking place on foot of its analysis of the records of 560,000 pensioners received from the Department of Social Protection. There isn’t anything new here; State pensions have always been liable to tax where a person’s income from all sources exceeds a certain level. The departments have been sharing information for some time now but this tranche of data was the most detailed yet. The records showed one in four pensioners weren’t paying enough tax; they also showed that about 20,000 pensioners had paid too much tax.
Q: Who will be worst affected?
A: If the data supplied about you by the department is the same as Revenue had on file, your liability won’t change. Also, if you live on the State pension and no other income you will not be affected. Social welfare benefits are taxable but anyone over 65 whose annual total income is less than €18,000 for a single person or under €36,000 for a married couple is exempt from income tax.
This exemption does not apply to people under 65 and on social welfare payments such as invalidity pension. If they have another source of income such as an occupational pension from work or spouse’s earnings, they may be liable for tax.
Anyone in receipt of a modest private pension of, say, €100 a week would also be unaffected but the situation changes for larger pensions. Revenue found at least 2,500 instances of pensioners in receipt of annual incomes over €50,000, for example. In a small number of cases where the pension was not previously on record and a pensioner’s second income brought them into the 41 per cent tax bracket, the annual additional liability could reach €4,400 for a single person and €8,800 for a couple.
Q: Ouch! What about my husband/wife’s pension?
A: This too is taxable. If the amount paid by the department includes a portion for a husband or wife and the couple are jointly assessed, the full amount of the State pension will be reflected on the tax credit certificate of the assessable spouse.
Q: If I am found to have been underpaying tax for a long period of time, am I going to face tax arrears going back years?
A: This is likely to be a source of great worry but has not yet been explicitly answered by Revenue. It says it needs time to sort out the current situation before deciding on historical arrears, but a senior official has already ruled out an amnesty. People who have overpaid tax over a period of years are being invited to write to Revenue seeking a refund.
Q: Where can I get more details?
A: Check out the Revenue website, revenue.ie. Its 1890 helpline is also operating today between 9.30am and 4.30pm. The number varies from region to region but should be printed on the letters sent out by Revenue to affected pensioners.
