CIR Calculation
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- Last Updated: Wednesday, 26 February 2025 14:35
Interpreting IRD CIR notification letters.
The CIR is a compulsory deduction rate applied by IRD when an employee has not been making re-payments, perhaps from only one source of income, but for whatever reason their payments are in arrears. It is in addition to the standard rate and can only be applied if an SDR is not in force. KeyPay will enforce these settings.
The specified rates in its payroll document are from 1 to 5% of the taxable gross income. Unfortunately, for reasons that escape us, letters from IRD specified it as a percentage of the standard rate, even though it is a completely independent calculation shown separately on the pay-day EI return. Typically, the rate specified in the letters was 41.67% of 12% which is actually 5% of gross and is what should be entered for the CIR % rate.
This issue has caused so much confusion and support calls, that in KeyPay entering more than 5 will invoke a pop-up where you can enter the rate that IRD specified and will calculate and apply the correct figure from 1 to 5%.
IRD also usually specify the amount to be recovered and this amount can be entered on the next line. When this value is exceeded the CIR deductions will automatically cease and the CIR state disabled.
i.e Set and forget.
Update: IRD appear to have come to their senses and the latest letters seem to specify 1-5%.