| | Common reasons for incorrect tax calculations |
| Description | This explains why tax calculations could be incorrect when processing payroll. We recommend that you check the following: - The tax details stored for the individual employee
- The payment types are set up for tax
- Any deduction types such as pensions and student loans are correct
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| Resolution | Check current tax details Every employee has a tax status. An employee's tax status tells the payroll how to calculate PAYE. It determines whether the employee receives their tax credits and rate bands on a cumulative basis or a Week 1/Month 1 basis, based on the information provided by Revenue through the RPN. To make sure the information is correct, carry out these steps: - Select the Employees tab.
- Select the employee.
- In the Current Tax Details section, check that the tax status is correct.
- If it's not correct, change it.
- Select Save.
If you’ve already completed a pay run using the incorrect tax details, you can correct the completed pay run to adjust the employee’s pay. Check payment settings An employee only pays tax on their taxable gross pay. Some payments such as business expenses are not subject to tax. Check that each payment type is correct. For example, the payment type for business expenses should be set up to not deduct tax. Non-taxable payments don't increase PAYE in the Edit Pay window. To check the settings applied to a particular payment: - Select the Settings tab.
- Select Payments & Deductions.
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Select the Payments tab, then select Edit next to the payment you want to check. Underneath the payment type, it specifies whether the payment is subject to PAYE and PRSI. Make sure that the payment’s name and description match its purpose. - If you need to change any of the details, make the necessary changes.
- Select Save.
If you’ve already paid an employee using the wrong payment type, you can edit the relevant pay run. Read Correct a completed pay run. Check deduction settings It’s important to make sure that all the deduction types are correct. The following deduction categories are available: - Pension. A deduction taken from the gross pay
- Net Deduction. A net deduction reduces the employee’s pay after tax is calculated. An example of a net deduction is for a Social club
- Gross Deduction. A gross deduction reduces the employee’s net pay before tax is calculated. It reduces the employee’s taxable pay. For example, Salary reduction for unpaid absences
To check the settings applied to a particular deduction, follow these steps: - Click the Settings tab.
- Select Payments & Deductions.
- Select the Deductions tab, then select Edit next to the deduction you want to check.
Underneath the payment type, it specifies whether the payment is subject to PAYE and PRSI. Make sure that the payment’s name and description match its purpose. - If you need to change any of the details, make the necessary changes.
- Select Save.
You may have already paid an employee using an incorrect deduction. You can edit the relevant pay run to rectify the error. |
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