Thousands of workers to be hit with tax bill from Covid wage supports

Taxback.com said thousands of workers would receive notification from Revenue in the coming days that their preliminary end-of-year statement is now available, and they now have a tax liability after receiving either the Pandemic Unemployment Payment (PUP) or the Temporary Wage Subsidy Scheme (TWSS). Picture: Laura Hutton/RollingNews.ie

Tax experts have warned Irish workers to brace themselves for a bill from Revenue emanating from emergency payments paid during the Covid-19 pandemic, with thousands expected to receive the unwelcome news.

Taxback.com said thousands of workers would receive notification from Revenue in the coming days that their preliminary end-of-year statement is now available, and they now have a tax liability after receiving either the Pandemic Unemployment Payment (PUP) or the Temporary Wage Subsidy Scheme (TWSS).

The only saving grace for many is that the bills will not have to be paid this year or next, Taxback said, urging people "not to panic".

The amount people owe will vary "vastly" and will take many workers by surprise that they even owe such a sum, it added.

Relief for Tax Payers who recevied TWSS

Taxes from Temporary Wage Subsidy Scheme can be paid 'over a number of years' - Donohoe https://t.co/xPFsEA9qoS via @newstalkfm #Taxback.com #taxes #twss #pup #COVID19ireland #COVID19

— Marian Ryan (@marianryan1983) September 25, 2020

Factors that will determine what is due will depend on factors such as pre-payment income, and employer top-ups, Taxback said.

Consumer tax manager for the firm, Marian Ryan, said: “The notification of the tax liability from Revenue is likely to come as a surprise to many and a shock to others. 

A lot of PUP and TWSS recipients are simply unaware that these payments will have given rise to a tax liability and even of those who expected it, many will be surprised as to exactly how much they owe."

For many more, the news will simply be the source of anxiety for people who are already financially stretched, she added.

"The main thing to bear in mind at this point is that Revenue have already said that this tax liability will not fall due this year, or even next year. 

"Although the option is available to taxpayers to clear the underpayment, people are not expected to make a lump sum payment. Instead, what will happen is that Revenue will reduce a person’s tax credits over a period of between two to four years, commencing in 2022."

In relation to TWSS, the amount people will owe will vary greatly from person to person, depending on their circumstances, their earnings before and after the payment, and if their employer subsidised it with additional income and topped up the employee’s gross weekly wage, according to Ms Ryan.

"For example, a typical worker on €35,000 who received the TWSS payment which wasn’t topped up by their employer can now expect to owe Revenue approximately €429. 

"If the same employee received the TWSS and their employer topped-up their gross weekly wage, they can now expect to owe approximately €1,334 in PAYE and USC," she said.

She cautioned that the examples did not take into account additional tax credits and expenses that TWSS recipients can claim in order to reduce their liability.

In Q2 2020, general government spending in Ireland was almost 30% higher than in the same quarter of 2019, driven by increases in transfers (PUP) and subsidies (TWSS).

From @EU_Eurostat, here are the equivalent changes across (what was) the EU15. pic.twitter.com/er6smjYhgo

— Seamus Coffey (@seamuscoffey) January 7, 2021

In relation to PUP, Ms Ryan said the potential PAYE and USC underpayments for those in receipt of the PUP will vary greatly depending on the pre-Covid earnings, how long they received the PUP for, and if they have returned to work on a similar or reduced income.

Revenue said it was important to note that each year, there is very much a normal end-of-year process for all PAYE taxpayers, and that this year is no different.

"In short, employers are required to confirm their monthly December 2020 employer PAYE return by January 14. From January 15, Revenue will then make a preliminary end-of-year statement available in myAccount for all PAYE taxpayers."