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Distinguish between a P45 and a P60 (i) (ii) - Leaving Cert Business - Question 2 - 2003
Question 2
Distinguish between a P45 and a P60 (i) (ii)
Worked Solution & Example Answer:Distinguish between a P45 and a P60 (i) (ii) - Leaving Cert Business - Question 2 - 2003
Step 1
(i) Distinguish between a P45 and a P60
Answer
A P45 is a cessation certificate issued when an employee leaves employment during the tax year. It contains important details such as the employee’s revenue, social insurance number, tax table, total pay to date, and any tax due. This document also includes a portion that is sent to the tax office and copies provided to the new employer to ensure correct tax processing.
In contrast, a P60 is a certificate of gross pay, tax, and PRSI deductions issued to employees at the end of the tax year. By December 31st each year, all PAYE taxpayers receive a P60 which confirms their earnings and deductions for that year. The P60 serves as proof of income for various purposes, such as applying for grants or loans.
Step 2
(ii) Distinguish between a P45 and a P60
Answer
While both documents relate to earnings and taxes, the P45 is specifically issued upon leaving a job, focusing on termination details, whereas the P60 summarizes the total financial year’s earnings and deductions, reflecting the employee's tax standing at year-end.