Refunds and tax bills for those on Covid payments

For some it was a nasty surprise but others were expecting it.

Last Friday around 420,000 people were issued tax bills as a result of payments they received under the two main Covid subsidy schemes last year. Indeed, over 600,000 people underpaid income tax or universal social charge in 2020.

According to Revenue, 71 per cent of those in receipt of the Temporary Wage Subsidy Scheme (TWSS) and 33 per cent of those on the Pandemic Unemployment Payment (PUP) underpaid tax, which will have to be paid.

However 80 per cent of taxpayers' statements are balanced, overpaid or underpaid by less than €200, while the good news is that 706,000 taxpayers are actually due a refund.

The details were in taxpayers’ preliminary end of year statement available through MyAccount on the Revenue online service.

Leona Ryan, Tax Manager with Taxbacknow Limited looked at the implications of these new Covid payment related tax bills:

“In March 2020, the Temporary Wage Subsidy Scheme (TWSS) and Pandemic Unemployment Payment (PUP) were introduced by the Government in response to Covid-19 and the mandatory shutting of businesses. These schemes were promptly introduced to alleviate the severe and abrupt economic impact of the Covid-19 pandemic and as a result the payments were made to everybody without deduction of Income Tax and Universal Social Charge (USC).

The good news is that Revenue has verified that any tax due on the TWSS and PUP received in 2020 will not be payable this year. Revenue will be seeking to collect it interest-free over a four-year period by reduction of tax credits.

However you have the options to settle the liability with Revenue fully or partially this year to avoid reduction of future tax credits from 2022-2025.

Amounts liable

“The amount taxpayers will owe will fluctuate significantly from taxpayer to taxpayer. Numerous factors will determine the tax liability or tax refund owed and everyone’s circumstances are different. For example, what did you earn before the TWSS and PUP payments and what did you earn after they ceased? Did you receive a top up from your employer? Are you married, single or a single parent?

What you need to do now

“Revenue has issued all taxpayers with a preliminary year end statement in the past few days. This statement is available on Revenue’s MyAccount.

Review your preliminary statement for 2020. Review the figures on the preliminary statement for accuracy.

All taxpayers will need to file a tax return to finalise the tax liability or tax refund.

When filing your tax return for 2020, you will have an opportunity to review your tax credits and claim additional tax credits (eg. health expenses, single parent tax credit, dependent relative tax credit, home care tax credit etc.) and you can offset any refund due on these additional credits against any liabilities that arose due to the TWSS or PUP.

Revenue will be contacting all individuals in receipt of TWSS and PUP and will request a tax return to be filed. However, you do not need to wait for this correspondence; you can file a tax return immediately.”

To see your preliminary end of year statement and other information, access MyAccount on the Revenue online service at revenue.ie.