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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.
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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Nice timing guys, just when the future is uncertain for many work wise…
@Linda Whelan: But we always knew this would happen… it was always coming.
@JustMeHere: doesn’t make it easier on struggling families
@Linda Whelan: it’s doesn’t change anything for any families, struggling or not! Really struggling families might actually be due a tax credit and rebate depending on their situation. It’s the guy at the edge of tax bands that might be caught out.
PS: remember that you were still working if you are in PUP , and entitled to WFH tax rebates as well.
@James Ward: yes you were working at the time, what if your job is gone now? What if your employer decides today that they are closing the doors for good, you now have no income and a tax bill. That’s all I meant.
@Linda Whelan: That bill is collected through your tax credits. You have to be in employment for that to happen. It won’t be happening this year and once they start reducing tax credits, where any reduction applies, they will spread it over a period of 4 years. Some will be able to off set their medical expenses against a portion of the tax owed. Some might even end up in a favorable position. It isn’t a perfect situation, but unfortunately we knew from the beginning that there would be tax implications. My husband availed of both TWSS and PUP, we both know tax underpayment is a possibility. Are we happy about it after a year of struggle? Not at all, but unless the government decides to wave it all together, which we all know won’t be happening, we don’t have much choice in the matter.
This needs to be scrapped! We bail out banks but not our own people?
@Noj Nikrub: And your surprised at this?
@Noj Nikrub: but The Taoseach said We NEVER bailed out the Banks… put your repayments on the longest finger
@Noj Nikrub: Bar Anglo, all the banks are paying back what they received plus interest plus a yearly charge for the bank guarantee scheme. It’s not a popular thing for people to hear, but it’s a fact. Oh, and anyone hear about the nasty bondholders loaning us €4.5 billion yesterday at a negative interest rate of -0.25% over 10yrs ? We’ll be paying back around €11 million less than they gave us. The Government can be slammed for a lot of things, but no-one can deny that was a fine bit of business.
@Noj Nikrub: this is an old argument… if the banks had failed we’d all have been significantly worse offf
By my calculations, for each weekly payment of €350 received, the tax due is likely to be about €6.50.
So even if PUP was received for 9 months, the total tax bill should be less than €250, and this can be spread over the next few years if needs be.
Not sure where this scaremongering about massive tax bills running to thousands of euro is coming from? Or am I missing something here??
@Kevin Collins: It seems to be a small amount Kevin. It will be interesting to see if it’s accurate.
@Kevin Collins: different story if you were on the subsidy
@Andrew Hannigan: @Andrew Hannigan: I’m not sure if my calculations are right so am open to correction here but if on the max TWSS of €410 for the full 22 weeks, this means a potential tax bill of about €405?
I’m not arguing whether or not it is right to impose this, moreso just want to help dispel concerns that people may have about about huge tax liabilities having built up.
@Kevin Collins:agreed that is not so bad if correct. However €410 for 22 weeks is €9,020 of untaxed income, €405 seems somewhat low for PAYE, USC PRSI. Not assuming you’re incorrect , had just assumed it would be higher.
@Kevin Collins: Even if €405 is correct, I don’t know, wouldn’t you have been paying that in income tax anyway if the pandemic hadn’t occurred ? Anyway, it’s the scaremongering aspect Andrew is trying to dispel. Even if it is €405, it would mean a tax credit adjustment over 4yrs to reflect a deduction of €1.95 per week. Hardly going to send families over the edge.
@Andrew Hannigan: you have to remember that for each week we receive €63 tax credit, more for single parents, married couples, where tax credits can be transferred. €410 taxed at 20% is just €82 less the credits of €63. Yes, USC also applies but it’s not extremely high on low earnings. There shouldn’t be any astronomical bills at the end of the year. I do know nobody wants a tax bill after the year we had, but hopefully they won’t be too high.
@Kevin Collins: €410 x 22 is €9020 in untaxed earnings… You think the tax liability on that will be less than 5%?
@place pages: for PAYE, yes. Workings below:
€410 * 20% = €82
Weekly tax credits are *at least* €63.85
So €18.15 tax per week * 22 weeks = €399.30. Probably lower depending on whether other tax credits are available.
As my example relates to someone who was receiving the TWSS payment, I’m assuming that PRSI and USC continued to be deducted at source as normal so no further liability arises there.
wondering will they send a tax bill to apple or is it only the workers who have to pay
@frank_1916: Apple and their workers pay nearly €100m in taxes each year. Considering the PUP outgoing is €4b, I’m pretty sure we’re grateful to Apple for being there.
@frank_1916: apple pay what tax they owe in this country, if you have proof of something maybe inform the EU and they can try and fail on another court case on our country.
@frank_1916: apple also employ thousands and as far as I’m aware, kept those people off PUP during the pandemic,.
We didn’t ask to lose our jobs or to be put on wage subsidy so why do we have to suffer the consequences? The hospitality sector has been specifically targeted and we’re going to suffer the worst, and we happen to be on the worst wages too.
@Tomo: Everyone is paying the consequences, we were warned this was coming. Why act surprised now?
@Dixieblue: Eh, I thought we were “all in this together”. In that case, everyone’s taxes should be raised to pay for the PUP. How would you feel if you had two children, rent to pay, etc. and the government shut down your workplace, you’re barely getting by on PUP, and now you have a huge tax burden on your shoulders?
Nobody wants to be on PUP. People act like it’s something people want. Everyone who’s on PUP wanted to work as they had jobs.
@Tomo: I’ve heard plenty of people say they are better off on the payment.
That doesn’t mean everyone but there are plenty who chose to stay on it rather than work.
The payment was a blunt instrument introduced in a hurry. And rightly so, they couldn’t afford to dither at the time. Now they will slowly go through all claimants to see who owes what. If you were worse off on the payment you probably won’t have a tax bill to worry about.
@Tomo: I can’t see it becoming a “huge tax burden” as you put it. I was on it for 14 weeks, I’ve 2 kids, rent, car repayments, loan repayments, all the bells and whistles most of us have attached to us. I wouldn’t have the knowledge of the tax system to accurately calculate what I’m going to have to pay back but I know that if I’d been on say €203 a week or thereabouts (like most basic recipients) I’d have been royally f€&%ed so I’m quite grateful for the dog out I got.
@Tomo: If you were on PUP then the huge tax burden you talk about is likely to result in your weekly income tax increasing by about €1. And it won’t increase until this time next year.
@Rostyballs78: *dig out
Sorry, who said what in the what now
We are effectively taking a pay cut if we received out regular net pay to out banks and are then to be taxed on that?
@Andrew Hannigan: agree Andrew, I can’t understand why people are so passive about this. I expect my employer to pay this tax liability.
Good luck with that. Blood from a stone comes to mind.
@Seán Óg: will follow you to the grave for what you owe.
Think I’ll pay them back at €5 a week starting from January 2022.. should be Grand..
I gather that Pearse Doherty of SF said on a radio programme that the PUP was only taxable from August 2020, as it was not considered taxable income before then. Is there any truth to this? (I got this information second-hand, so I am posing a question – not trying to start a rumour).
@Earth Traveller: If you listened on Newstalk to the interview after Pearse Doherty the head of the accountancy profession stated his (Pearse Doherty) comments were incorrect. Pat Kenny was astounded that the Finance spokesman was so poorly informed. Everybody knew there would be a tax liability because of the PUP and TWSS and if they didn’t they should have listened to the news.
Something doesn’t sound right here…
“over the 22-week lifespan of the TWSS, employers were not required to do this [deduct income tax], meaning that liabilities built up over time.”
Surely then the liability for the unpaid tax should be with the employer and not the employee?
@Handsome McWonderful: Yes you would think so. The ordinary worker gets screwed again.
@Handsome McWonderful: Yes you would think so. The ordinary worker gets punished for this.
any sign of mary lou she’s all the good answers
Buy Bitcoin!
@Ryan: I wouldn’t it’s just about to crash
@Ryan: HODL. And as Michael Saylor would say..no such thing as a free lunch!
Ian Curran, you really need to publish the correct information regarding the TWSS. You do realise that anyone who was on this was still only paid their NET wages. It’s not like they were paid their GROSS wages and had extra money each week due to the non payment of TAX. The employer was only required to top up to NET pay. As usual the tax payer is screwed again as anyone on this scheme was working for less for the duration.
@cars: Exactly. I worked from home during the full period. A full week, with no drop in business (and I would assume therefore overall revenue) for my company and now I got a hefty tax bill coming my way, yet my net pay did not change throughout.
@cars: totally agree. I exoect my employer to pay the liability
@cars: Totally agree, paid at Nett pay and not gross. Surely this is in breach of your employment contract and the employer needs to pay the difference to help with this tax bill. The PUP was launched as tax free or it was nett and tax was paid, they back tracked on this.
Can you explain this further?
People actually got paid their net salary & are now having to pay their normal tax on what the salary should have been after tax? I can’t comprehend how anybody thought this was fair? Surely the company should be liable for the tax due as they didn’t pay out the full wage in the first place?
So my take home pay didn’t change, my company was subsidised to reduce their wage bill, why am I paying tax on a subsidy the company received.
More than Amazon anyway
I don’t understand why people aren’t up in arms over the TWSS scheme – your employer paid you your average (Jan/Feb) net income e.g. your take home pay and now you’re going to essentially be taxed on this income so its being reduced further i.e. if you earned 3000 per month in Jan and Feb, paid Taxes of 750 each month so that you took home 2250 each month, then TWSS was introduced your employer paid you the subsidy and topped you up to 2250 and now you’re gonna be paying tax on the 2250 so you’ve essentially taken a pay cut, e.g. you may effectively only have received 1800 in the end? Total shambles.
@Jennifer Murphy: exactly. Employers get the benefits of you working while not paying you and you get Taxed on your own pay cut. Disgrace.. Make sure to get a pay rise or walk into a better paid job if it’s an option – yes I know, it’s not that easy…
I taught it was FREE money just try to make me pay it back
Property Tax due as well this month. Tax on PUP and wage subsidy should be deferred until the payments stop.
Got to pay every cent back.
And once again its the people who never worked a day in there life pay no taxes and are entitled to everything don’t have a care in the world while the hard working man or women be breaking there back to just make a living and be lucky just to have a roof over there head and food on the table. Its the working class and the self employed who have to suffer in all this. The sad part we are already living in a over priced country, it’s going to get a lot worse. They have to make there money back somewhere.
Tax??? You mean someone has to pay for this year long lockdown?? And it’s us?!?
Blame Trump
It was the Government who set the payment no one else. So should persons pay tax on their payment No Most all would have being happen to draw from their PRSI payments but it was ye who changed the rules.
have your say