Maths tax question help badly

Irish Fox

Need help with this sum

Irish Fox

this picture should be the first one

Bottleopener

http://i44.tinypic.com/iznnl4.jpg

If anything needs clarification or if you spot any errors just ask

MathsManiac

In relation to your solution, Bottleopener, you should really subtract the tax credits from the gross tax payable before you go on to consider the PRSI and the USC, rather than subtracting it from the total of all the deductions.

It doesn't make a difference to the final answer for net salary in this case, but it might in some other case. You cannot offset tax credits against PRSI or USC, so, if the person's gross tax liability was greater than their tax credits, and if someone followed the exact same method as you did here, they would get the wrong answer. (e.g., if Mary's taxable income in this question was €7000 a year instead of €60000, the gross tax payable would be €1400. Since this is less than the tax credit of €1650, she would pay no income tax. However, she would still have to pay €15.84 in PRSI and €140 USC, and she would not be allowed to offset her "spare" €250 of tax credits against this.)

Also, even though you might take the view that PRSI and USC are taxes by another name, they are not income tax for the purposes of examples such as this and so I think it would be better not to call them taxes in the solution. (It's better to call them "other deductions" or something like that.) My point here is that if, in another question, someone was asked to calculate the "tax payable", the correct answer would not be the same thing as the number that you have called "tax payable". The tax payable is the gross tax less the tax credits, which in this case is 17712 - 1650 = 16062. When the tax payable and the other deductions are subtracted from the gross income, the net income is, as you have said, €38723.20.

Irish Fox

thank you very much

Bottleopener

Cheers for the corrections dude, was unsure which to take the tax credits from but figured in this case it made no difference so it was 50/50 =P. As for terminology, yeah I've forgotten a lot. Will know in future, cheers!