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Received the PUP or the Covid wage subsidy? Next week, you'll find out what income tax you owe

Here’s a quick guide to how the process will work.
Jan 6th 2021, 3:54 PM 235,769 62

IT’S BEEN FLAGGED for months but if you received payments under the Government’s Covid income support schemes in 2020, you’ll soon receive some clarity about how much income tax you owe for last year.

The Revenue Commissioners have confirmed that, as is always the case in January, preliminary statements of liability for 2020 will be available to all PAYE workers from next Friday, 15 January.

There’s only one real difference.

If in 2020 your wages were at any stage subsided through the Temporary Wage Subsidy Scheme (TWSS) or if you received the Pandemic Unemployment Payment (PUP), you’ll be informed of your outstanding tax liabilities.

But don’t panic — the taxman won’t be at your door demanding payment immediately.

Here’s how it will work:

Liabilities? What liabilities?

Introduced last March and aimed at protecting jobs through the first period of Government-imposed business restrictions, the TWSS was a wage refund scheme for employers.

Those eligible received up to a maximum of €410 per qualified employee per week.

It was confirmed early on that income subsidised through the TWSS was subject to the usual income taxes.

Now, under normal circumstances, if you’re a PAYE employee, your employer deducts income tax from your wages on your behalf.

But over the 22-week lifespan of the TWSS, employers were not required to do this, meaning that liabilities built up over time.

Separately, the PUP — like most social welfare payments — is also taxable.

Fortunately for PAYE employees — who don’t normally have to do their own taxes — the TWSS was replaced last September by the Employment Wage Subsidy Scheme after which, employers resumed deducting income tax ‘at source’ as normal.

But for many, there will be unpaid taxes for 2020 that have to be dealt with.

How much you have to pay back will vary from person to person.

But in a pre-Budget submission last year, the Chartered Consultative Committee of Accountancy Bodies Ireland explained that, for example, if you received €350 per week for the full 22 weeks, this would amount to roughly €7,700 in untaxed income.

Preliminary statements

On Friday, 15 January, all PAYE workers will receive a preliminary statement of tax liability for 2020 on the MyAccount section of the Revenue.ie website.

The Revenue Commissioners have stressed that this is business as usual.

“Each year, there is very much a normal end of year process for PAYE taxpayers and this year is no different,” a Revenue spokesperson confirmed.

For employers, this means they have to confirm their monthly December 2020 Employer PAYE return by 14 January.

For employees, this preliminary statement will set out what exactly your tax liabilities are before tax credits and other deductions are applied.

Income tax returns

Once you receive your preliminary statement, you’ll have to finalise your tax position for 2020.

You’ll have to do this by filling out an income tax return in the MyAccount section of the Revenue website.

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But again, don’t panic — Revenue has simplified the process.

The tax return will be “pre-populated” with the information shown on the preliminary statement for 2020, a spokesperson confirmed.

She added, “This pre-population makes it quicker and easier for taxpayers to complete returns and minimises the possibility of errors and omissions.”

You “can then review the information presented and claim additional tax credits (e.g. health expenses) or declare additional incomes as necessary.”

Once this is done, you’ll receive a final statement of tax liability for 2020, setting out your true position for the year.

Paying it back

When you receive your final statement, don’t worry just yet — you don’t have to pay it back right away.

You can do that if you want but as set out last autumn, the Revenue will give you the option to back the money in increments over a four-year period.

“Revenue has set out as far back as last September that such liabilities will be collected, interest-free, by reducing the employees’ tax credits over four years to minimise any hardship. The reduction of tax credits will not start until January 2022,” the spokesperson confirmed.

Alternatively, you can pay your taxes straight away through the ‘Payments/Repayments’ facility in MyAccount.

For more information, you can visit the ‘Popular Topics’ section of the Revenue website here.

Next week, Revenue will also be running a national media campaign aimed at reminding PAYE taxpayers of how it will all work.

 

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Ian Curran

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