On Friday January 15, Revenue made Preliminary End of Year Statements available to PAYE taxpayers, setting out their provisional tax position for 2020. For taxpayers who were in receipt of either Temporary Wage Subsidy Scheme (TWSS) payments and/or Pandemic Unemployment Payment (PUP), this statement advises them if they are in the position of having underpaid tax and/or USC and by how much. According to Revenue statistics, approximately 27% of taxpayers are in this position.
Mr. Declan Rigney, head of Revenue’s Personal Division, is keen to reassure taxpayers that they will be able to clear any tax liability over an extended period of time.
“Statistics clearly show that across the entire PAYE case base, including those in receipt of TWSS and/or PUP subsidy payments, over 80% have a preliminary end of year tax position that is either balanced, overpaid or underpaid by less than €200,” he said.
“Given that Revenue has confirmed that it will collect any tax owing, interest-free, over a 4-year period, this equates to a collection of €1 extra in tax per week for those with an underpayment of €200.
“Revenue is very aware that underpayments could cause financial difficulties for some people and wish to reassure these taxpayers that collection will not start until January 2022, one year from now. Also, given the collection of the amount owed will be spread over 4 years, an underpayment, for example, of €1,000 will be collected in amounts of just under €5 per week.”
Mr Rigney pointed out that the Preliminary End of Year Statement is only a provisional tax position, which is something Marian Ryan, Consumer Tax Manager at Taxback.com, is also keen to stress.
Ms Ryan and Taxback.com regularly highlight how many PAYE taxpayers leave tax reliefs unclaimed and suggests this is an opportunity to sit down and correct that and help defray any tax liability in the process.
“Irish people really aren’t great for claiming their tax reliefs and refunds,” she said. “So it’s likely that many of these workers will be eligible for a tax refund on the back of reliefs such as medical expenses, eWorkers relief, flat rate expenses etc.
“If you’re a PAYE employee, unless you have income from other sources, you don’t have to file an annual tax return. This means that most PAYE employees are not really in-tune with their annual tax affairs. Our experience would suggest that very few people pay much attention to things like Preliminary Tax Statements or personal tax credits. So while a notification of a tax liability certainly won’t be welcomed, perhaps the silver lining might be that it will prompt people to be more proactive when it comes to claiming reliefs and refunds going forward.”
An employee can finalise his or her tax position for 2020 by completing an income tax return online.
“This tax return will be pre-populated with the information shown on the Preliminary End of Year Statement which makes it relatively straight forward to complete and minimises the possibility of errors and omissions,” Mr Digney said.
“Completing a tax return allows an employee to review the information presented and to claim additional tax credits, such as health expenses, or declare additional incomes, as appropriate. Once an employee submits his or her tax return, a Statement of Liability will issue shortly afterwards, setting out the final tax and USC position for the year.”
Ms Ryan also highlighted:“You can actually go back as far as four years which is great, because it means those who have never claimed don’t have to write off all those years.”
She advises people not to be alarmed but to use this as an opportunity to get your tax affairs in order.
“The main reliefs that would apply to the greatest number of people in 2021 are most likely Medical Expenses; Flat Rate Expenses; eWorker’s relief; the Stay-and-Spend Initiative; and Tuition Fees, though there are a raft of other reliefs that might apply to an individual,” she said.
Revenue’s online system for PAYE taxpayers, My Account, is easy to register for and straightforward to use. Thousands of taxpayers use the system to file tax returns every year and many receive a tax refund straight to their bank account within days. However, if you don’t want to tackle it yourself or are unsure where to start, tax advisers like those at Taxback.com can help.
“If someone has received either the TWSS or PUP and fear they may potentially have a liability for 2020 as a result, they can contact us at Taxback.com and we can complete a comprehensive 4-year tax review for them to optimise their position,” Ms Ryan said. “If it is a case that they are due a refund, our fee would be 10% of the refund. If it is a case that there is a liability that we can reduce for them, we can file their tax return to reduce their liability for a fee of €40.
“The main thing to remember is that if you have a liability, it is important to have 2020 reviewed as you could potentially reduce or completely eliminate this underpayment by claiming all tax credits and expenses available.”