After it has been recently reported in the media that over €10 million has been refunded to taxpayers for PRSI, with the average refund being €385, many people are confused as to whether they are also entitled to a refund. The following should help to clear up any uncertainty.
What is the refund?
The refund relates to the Health Levy portion of the PRSI charge. Health Levy was abolished after 31 December 2010 (along with the income levy, which were both replaced by the Universal Social Charge). Therefore these refunds will only relate to the 2010 tax year and earlier.
Who is entitled to a refund?
Firstly you must have earned €26,000 or less in 2008, 2009 or 2010. If you earned less than €26,000 in any of these years but at points during the year earned more than €500 per week, you may be entitled to a refund.
The easiest way to check this is to review your payslips or P60 for each year. If your payslips show that your PRSI Class at any time was Class A1, this means that you earned more than €500 per week for the period covered by the payslip. If you do not have your payslips available, your P60 for the year should also show if you paid PRSI at Class A1 at any time during the year.
So in summary, you need to check 2 things.
1) Did you earn less than €26,000 in a year?
2) Did you pay PRSI at Class A1 at any time during that year?
If the answer to both is yes, you should be due a refund. The size of the refund will increase according to the number of weeks that you paid PRSI at Class A1.
Why did this occur?
This has not been caused by any error with Revenue or the Department of Social Protection. The PRSI system had always worked on what is known as a Week One basis. This means that you paid PRSI on the basis of how much you earned in a particular week or month. No account was taken of your total earnings at that point in the year - instead the PRSI deducted was simply based exclusively on your earnings for a particular week or month.
However if your total earnings for the year were below a certain threshold you would be exempt from the health levy and entitled to a PRSI refund. So at the end of each year eligible taxpayers could apply for a refund from the Department of Social Protection (not the Revenue). A lot of people were not aware of this rule until the recent media coverage. So it is not something new, just something that many people were not aware of until now. It is common for many people to not be aware of all the tax reliefs and refunds that they are entitled to claim. This is one of the reasons that Fenero has always strongly encouraged PAYE workers as well as self-assessed tax payers and business owners to get in contact with us for advice on reducing your tax liabilities.
What is the time limit for claims?
There is a time limit of 4 years in relation to all types of tax refunds. Currently the oldest tax refunds that you can claim for relate to the 2008 tax year onwards. After 31 December 2012, you will no longer be able to claim for tax refunds relating to the 2008 tax year.
As the Health Levy was abolished in 2011, the only years that you can currently claim your Health Levy PRSI refund for are 2008, 2009 and 2010. So there is no point in reviewing P60s or payslips for any other tax year in relation to this particular tax refund.
How to apply?
If you believe you are entitled to a refund of the Health Levy based on the above, you should send a copy of your P60 and cover letter to:
Department of Social Protection
PRSI Refunds Section
As ever, Fenero are on hand to assist with any queries that you may have in relation to this refund and any other tax queries that you may have. We are contactable by email on firstname.lastname@example.org or by phone on 01-6877400. We are a friendly bunch – drop us a line!