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Flashcards in Compulsory Deductions Deck (14)
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1
Q

What are compulsory deductions?

A

Statutory payments that must be paid to the state

2
Q

List the compulsory deductions which must be paid in Ireland

A

Income tax/Pay as you earn (PAYE)
Pay-Related Social Insurance (PRSI)
Universal social charge (USC)

3
Q

Write a note on Income Tax

4 points

A

A compulsory tax taken from a person’s gross pay

The employer is legally required to deduct tax owed from a person’s gross wage or salary before payment

Paid directly to the Revenue Commissioners who collect this tax on behalf of the government

This money is used to maintain state services such as education

4
Q

How is income tax calculated?

4 points

A

Calculated as a percentage of a person’s total income

The amount to be paid depends on individual circumstances

Individuals on a very low income are exempt from paying tax

There are two rates of income tax

5
Q

What are the two rates of income tax?

A

A standard rate of tax at 20%
-Applies to income up to the standard rate cut-off point

A higher rate of tax at 40%
-Applies to any income earned above a person’s standard rate cut-off point

6
Q

How is the standard rate cut-off point calculated for income tax?

A

It is calculated by the Revenue Commissioners and depends on individual circumstances

7
Q

What are tax credits?

A

They reduce the amount of income tax a person has to pay

8
Q

What is a notice of determination of tax credits and standard rate cut-off point?

A

A certificate sent to an employee by the Revenue Commissioners which lists his or her tax credit entitlements and tax liability

9
Q

Write a note on PRSI

4 main points

A

A compulsory contribution taken from a person’s gross pay by an employer and paid directly to the Revenue Commissioners

The money from this is used by the government to run employment and training schemes and social welfare payments

A minimum number of 39 PRSI contributions must be made by an employee in the past tax year for them to claim social welfare benefits

Self-employed people pay low rates of PRSI and are entitled to a limited number of social welfare benefits

10
Q

How are tax credits calculated?

A

They are calculated based on a number of factors including gross income and type of employment

11
Q

How is PRSI calculated?

4 points

A

It is calculated as a percentage of a person’s total income

The amount due depends on individual circumstances

Both the employee and the employer share the cost of PRSI payments

Individuals on a very low income are exempt from paying PRSI

12
Q

Write a note on Universal Social Charge

A

A compulsory tax taken from a person’s gross pay by an employer and paid directly to the Revenue Commissioners

Employees are liable to pay USC tax if their gross income is above 13,000 annually

Individuals who earn below 13,000 are exempt from paying USC

The amount due is calculated as a percentage of a person’s total income

13
Q

What is P60?

2 points

A

A document sent by all employers to their employees at the end of the tax year.

It contains details of pay and the income tax, PRSI and USC that have been deducted by the employer and paid to Revenue

14
Q

What is P45?

3 points

A

A document sent by an employer to their employee who has left their place of employment

It is a statement of pay as well as income tax, USC and PRSI that has been deducted up to the date they left

It is used by the new employer to help work out how much tax the person has to pay