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Explainer: Preliminary 2020 tax bills are now available to all PAYE workers — but how does it all work?

Your final bill can be significantly reduced to zero or even turned into a refund.

Image: Shutterstock/Bianca Grueneberg

FROM TODAY, ALL PAYE workers can check if they have any outstanding tax liabilities from 2020.

This morning, the Revenue made preliminary statements of tax liability available for all employees through the MyAccount portal on the Revenue.ie website.

Some 46% of us will have no outstanding balance for 2020 but 27% (over 600,000 workers) will have some sort of a hangover from last year.

Of that 600,000, over 400,000 people received payments under one of the government’s Covid support schemes, the Temporary Wage Subsidy Scheme (TWSS) or the Pandemic Unemployment Payment (PUP).

Payments made under these schemes were not taxed at source, leaving an accumulation of tax liabilities that will have to be paid back.

Now – at the best of times, tax is confusing.

For many PAYE workers, who are used to their employers deducting income taxes and Universal Social Charge ‘at source’, this will be uncharted territory.

But to add to the confusion, the TWSS was replaced last September by the Employment Wage Subsidy Scheme, which remains in place. The good news is that payments made under that scheme are taxed at source as normal, meaning you won’t have to worry about doing this all over again next year if your employer is still availing of it today.

With all of this in mind, we’re going to try to answer some of the most pressing questions.  

When will I have to pay it back?

Probably the most important thing to understand if you received a preliminary tax bill this morning is when you’ll have to pay it back.

The simple answer is: not right now.

The Revenue Commissioners have repeatedly stated that to “minimise any hardship”, you can pay the money back gradually over a period of four years.

Revenue will do this by reducing your tax credits over time.

Crucially, that process won’t start until 2022 so you won’t have to pay a cent until then, unless you want to, of course.

If you do want to square away your tax affairs as soon as possible, you can opt to pay back the money straight away through the ‘Payments/Repayments’ facility in MyAccount.

How do I access my preliminary statement?

First of all, you’ll have to log onto the MyAccount section of the Revenue.ie website.

If you don’t have an account yet, it shouldn’t take too long to set one up. All you need is your PPS number, email address, home address and phone number.

Once you’re in, you’ll see a section titled ‘PAYE services’.

To access your preliminary statement, just click ‘Review Your Tax 2017-2020′.

You’ll then have an option to ‘request’ your preliminary statement of liability, which should appear in a matter of seconds, depending on how much traffic the Revenue website is handling.

How much will I owe?

This will vary from person to person.

Your statement will tell you whether you have overpaid or underpaid tax and by how much.

If you have overpaid, you’ll be due a refund. According to Revenue data, over 706,000 taxpayers are in this position.

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“For those PAYE taxpayers that were in receipt of one or more of the wage supports during 2020, about 47% are either due a refund or have no additional liability; a further 23% have an additional tax liability of less than €500 and a further 15% have an additional tax liability of between €500 and €1,000,” explained Declan Rigney, head of Revenue’s Personal Division in a statement last night.

Is this my final tax bill?

No, it’s just a preliminary statement.

Once you have it, you have to follow through and fill out an income tax return form on the Revenue.ie website.

All of the info from your statement will automatically appear in this form, meaning you just have to click through, check the info and approve it.

It will also include whatever employee tax credits you’re entitled to.

This means that your final bill could be much lower than the figure stated in your preliminary statement.

How can I reduce my bill?

Apart from your standard tax credits, you might be entitled to others that can help shrink your final tax bill.

“Importantly, the figure owed to Revenue could be reduced to zero or even turned into a refund by claiming additional tax credits which many people are entitled to, but often don’t claim,” a spokesperson for the Association of Chartered Certified Accountants Ireland (ACCA) explained this morning.

According to ACCA, other tax credits include:

  • An eWorking tax credit of up €200, based on a simple formula of 30% of broadband costs and 10% of electricity costs
  • A home carer tax credit of up to €1,500 for people at home looking after their own children, a parent or relative living locally
  • Health and dental expenses 
  • Tax relief for pension contributions — a one-off payment to your pension as an “additional voluntary contribution” that will reduce your tax bill by up to €40 for every €100 contributed to the pension.

“These PAYE tax credits can be easily claimed through the ‘myaccount’ section of the Revenue website and you will not need an accountant to do this. Assistance can be accessed through Revenue’s online chat facility where queries can be answered, and more information can be provided,” the spokesperson said.

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