Revenue seeking €219m in unpaid tax from Covid-19 payment recipients

Making full use of your tax credits, it may be possible to eliminate or significantly lower any underpayment

You can claim for expenses that you have receipts for, and only for the last four years.

Nearly 300,000 Irish taxpayers received a letter from Revenue this month, asking them to complete a tax return for the years 2019-2021 before the end of this month.

Why? Because the taxman is owed a combined total of €219m by 280,000 taxpayers who received the Pandemic Unemployment Payment (PUP) and the Temporary Wage Subsidy Scheme (TWSS) during the Covid-19 shutdowns.

The issue is that neither income tax, PRSI nor USC were automatically deducted from PUP or TWSS payments.

The amount owed varies substantially. Some taxpayers will have to fork out as much as €2,500, while others owe less than €1,000. The underpayment is dependent on whether you returned to work in 2020, on the same salary as pre-Covid.

Gerry Scully, an accountant with Irish Tax Rebates, explains that Revenue is contacting taxpayers and requesting that under Section 879 of the Taxes Consolidation Act, 1997, they complete and submit an Income Tax Return for any years where a return has not been already filed.

If you’re one of those who received a letter, the message is don’t worry. Revenue says that where an underpayment occurs, they will ‘minimise any hardship’ by automatically collecting the underpayment via future tax credits over a maximum period of four years.

This means that Revenue will allocate a portion of your tax credits towards the underpayment and collect the liability through the tax you pay in your salary over four years.

Of course, if you wish to get the pain out of the way up front, you can also get in touch with Revenue and make a full or partial payment.

As Mr Scully points out however, if you make full use of your tax credits, it may actually be possible to eliminate, or significantly reduce any underpayment.

“People who are receiving these notifications about underpayments may be unaware of tax credits they are entitled to claim,” he said. “Claiming these extra tax credits will help to reduce or eliminate the underpayment. There may also be overpayments of tax in some years that remain unclaimed and if there is, these overpayments can offset against the underpayment.”

Tax refund specialists Taxback.com estimates that as much as €300m was overpaid by taxpayers last year.

During the summer, the company released their Customer Index for 2021, detailing how much Irish people are claiming back, who is best at claiming and what are the top reliefs and refunds.

Between the end of 2020 and the end of 2021, the average refund claimed by taxpayers amounted €1,880, up from €1,076 in previous years.

Medical expense tax refunds remain the most common relief claimed in the year. The data, which looks at the refunds that Taxback.com’s clients applied for and received over the previous 12 months, highlights the fact that men in Ireland are more active than their female counterparts for claiming what’s owed, and that they tend to receive higher refunds when they do.

Joanna Murphy, CEO of Taxback.com, estimates that 450,000 people overpaid a total of €300m in income tax in 2021.

“If we go back even further, to the last year in which people can still claim, Revenue records reveal that since 2019, €620m has been overpaid. So the question remains — how do we get people to claim what they are owed?”

You generally receive tax relief for health expenses at your standard rate of tax (20%). Nursing home expenses are given at your highest rate (up to 40%). Qualifying expenses include, among other things, doctors’ and consultants’ services, maternity care, diagnostic procedures, IVF, non-routine dental work, and those aforementioned nursing home expenses.

The easiest way to claim relief on health expenses is through Revenue’s myAccount or ROS portals.

You can only claim for expenses that you have receipts for, and only for the last four years. If you have private health insurance, you can claim tax relief on the portion of those expenses not covered by your insurer. For more details, check the revenue site.

We also know that third-level tuition fee payers are missing out on very significant refunds. Tax relief is granted at the standard rate of tax, currently 20%, and there is a limit of €7,000 per course on which you can claim relief. There is also a ‘disregard amount’, which stands at €3,000 for a full-time course and €1,500 for a part time course. This figure is deducted from your total qualifying fees — but it’s only taken away once per year, no matter how many students you’re claiming for.

So which courses qualify? The vast majority of them, it seems. All courses in Ireland that are provided by publicly funded universities, colleges and institutes of higher education are approved for tax relief. Nor is the relief restricted to Ireland.

Courses provided by publicly funded or accredited universities and institutions in other EU member states are also approved, whether you’re studying at a distance or attending in person.

You can choose to claim relief on your tuition fee installments either in the tax year that the academic year began or in the tax year in which you paid the installment.

Note too that while you can claim relief on the student contribution, there are some third level fees for which you can’t claim. These include capitation fees, registration and admin fees.

If you’ve changed job during the year, or if your employment record is punctuated by periods of unemployment, there could well be tax reliefs due to you. Similarly, if you or your spouse has been made redundant during the tax year, you might not be getting the full benefit of the transferability of allowances. Take the time to sit down and review your affairs and make sure everything is up to date.

“The reality is that we’re really not great in this country for claiming the reliefs and refunds owed,” says Ms. Murphy, “which is a shame because many households throughout the country could really benefit from that added cash injection. Many people are still unwilling to apply for a tax refund possibly because they believe it’s a difficult process or a ‘hassle’, but the reality is it’s very straightforward, and only requires a little prep in terms of keeping receipts or following up with your health practice or dentist etc. to obtain the ones you don’t have.”

“We would encourage everyone to take greater stock of their financial wellbeing and ensure they are not overpaying in tax. While we understand that tasks relating to tax refunds and reliefs may seem confusing at first - or even overwhelming - there is plenty of help available, either online through Revenue, or through a trusted tax agent.”