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PAYE overpayments and underpayments of tax

PAYE overpayments and underpayments of tax

An overpayment of tax happens when you have paid more tax than you were liable to pay. If you have overpaid tax you will get a tax refund. You must claim a tax refund within 4 years of the end of the year in which the overpayment arose or you will not get a refund.

An underpayment of tax is when you have paid less tax than you were liable to pay. If you have paid too little tax you will owe Revenue the difference between what you actually paid and what you should have paid. You may not know that you have paid too little tax, but you are still responsible for paying Revenue if an underpayment of tax has occurred.

If you are a PAYE taxpayer, each year you can request a tax credit certificate from Revenue. If you are registered with Revenue's PAYE Anytime service you can view your tax credit certificate online. Your tax credit certificate will show the tax credits that your employer is deducting from your tax bill. If you find out during the year that your tax credits are not correct you should contact Revenue and any refund you may be due will be paid to you by your employer. It is also important to check you are not claiming tax credits you are not entitled to, as this will result in an underpayment of tax.

To find out whether you owe tax or are due a tax refund you can request a P21 at the end of the year.

Form P21 - PAYE Balancing Statement

When the year has ended you can request a P21. This is an end of year review of your tax liability. You can get a P21 for the last 4 years. (You can only claim a refund of overpaid tax for the last 4 years.) A P21 statement gives details of your total income, tax credits, tax reliefs and PAYE tax paid for a particular tax year. You can request a P21 online if you have registered with Revenue’s PAYE Anytime online service.

To get a P21 you must send the following to your district tax office:

  • Your P60 form (and, if relevant, a P60 form for your spouse or civil partner) for the tax year
  • Details of your claim for additional tax credits. If you want to claim tax relief for medical expenses you will also need to complete and submit Form Med 1 (pdf).

You may also have to complete and return a Form 12 (pdf) but not unless you are requested to do so by Revenue. Form 12 is a detailed tax return form.

A P21 is often used as proof of earnings to get a maintenance grant, a mortgage for a house or a loan.

Overpayments

You may have overpaid tax if you become unemployed or are out of work sick. Find out more about claiming a tax refund if you are unemployed or out of work sick. You may have overpaid tax if your tax credits are incorrect or you haven’t claimed tax relief for certain of your expenses. Find out more about the tax credits and reliefs you may be entitled to claim.

If you have overpaid tax, a cheque for the amount overpaid will be attached to your P21. If you submitted a Form 12 as part of your end of year review you can also provide your bank account details and Revenue will refund the overpayment to your bank account.

Underpayments

An underpayment will remain on your tax record with Revenue until it is paid. Your P21 or end of year review will show if you have underpaid tax. It will also inform you how the underpayment will be collected. Usually, you will not pay money directly to Revenue. The easiest way for Revenue to collect the underpayment is to reduce your tax credits in the following year.

For example, if you get a personal tax credit of €1,650 and a PAYE tax credit of €1,650 your total tax credit for 2014 is €3,300. If you underpaid €90 tax in 2013, your total tax credit in 2014 will be reduced by €90. (€3,300 - €90 = €3,210) In this case, your total tax credit for 2014 will be changed to €3,210.

An underpayment can also be deducted from any tax relief you are due. For example, if you have underpaid your income tax by €100 but are also due to get tax relief of €400 on medical expenses, the underpayment of €100 will be deducted from the overpayment of €400 and you will get a refund of €300.

If you have a large underpayment which can not be easily repaid by reducing your tax credits the following year, you can arrange to pay Revenue directly by cheque, banker’s draft or postal order. You can pay the total amount in one payment or in instalments. You will need to contact your district tax office about repaying the underpayment.

Outstanding tax due to Revenue can incur interest and penalties. If you refuse to repay tax that is due Revenue can take you to court.

Where to apply

If you think your tax is currently being calculated incorrectly or you want to request a P21 contact your district tax office.

Page updated: 21 January 2014

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If you have a question relating to this topic you can contact the Citizens Information Phone Service on 0761 07 4000 (Monday to Friday, 9am to 8pm) or you can visit your local Citizens Information Centre.