Tax Implications When Starting Work

I have recently returned home from college for the holidays and am looking for my first summer job. Will I have to pay tax on my earnings and if so, what do I need to do to sort out the situation?

Holiday work is taxed in the same way as any other employment. Your employer will deduct tax from your wages under the Paye As You Earn (PAYE) system. Depending on how much you earn, you may also be paying PRSI and Universal Social Charge.

Once you have found a job, you must give your PPS number to your new employer so they can let the tax office know you will be working for them. You can find your PPS number on your social services card, drugs payment card or any previous correspondence you might have had with the Department of Social Welfare. Contact your local Welfare office for help if you can’t find your number.

You then need to apply for a certificate of tax credits by completing “Form 12A – Application for Certificate of Tax Credits and Standard Rate Cut-Off Point”. This form is available to download on revenue.ie. Your employer will tell you their registered tax number and which tax office the form should be sent to.

The tax office will then send you a detailed statement of your tax credits and standard rate cut-off point. They will also let your employer know what your credits are.

Tax credits reduce the amount of tax you have to pay and will depend on your personal circumstances. Your gross tax is calculated on your total income. If your gross tax is more than your tax credits, the tax you pay will be the difference between the two. If your credits are greater than your gross tax, you won’t pay any tax.

You usually start paying tax from your first pay day. The system works on a cumulative basis. For example, if you only start work in the 22^nd week of the year, you will have 22 weeks of unused credits to offset against your tax liability. Even if you start work half way through the year, you will still qualify for a full year’s tax credits.

If you don’t follow the steps outlined above, your employer is obliged to deduct emergency tax from your wages until they have details of your tax credits. If this happens, you will receive a temporary tax credit for the first month but your tax deductions will increase progressively after this.

When you have finished work and are going back to college, you may be able to claim a tax refund, depending on your income and unused credits. To apply for a refund, you will need to complete “Form P50 – First Claim for Tax Repayment during Unemployment”, which can also be downloaded from the Revenue website. Send the form to the tax office, along with parts 2 and 3 of your P45, which you will receive from your employer when you finish work. If you continue to work part time for the rest of the year, you won’t be entitled to a refund.