The welcome Government financial support during the pandemic may have given rise to a tax liability for the taxpayer. Many recipients are not aware of the tax consequences of receiving the Pandemic Unemployment Payment and Temporary Wages Subsidy Scheme payment. The Department of Employment Affairs and Social Protection shares information with Revenue and so Revenue are aware of each payment made to the taxpayer. However, according to Revenue it may be the case that the taxpayer may have unused tax credits that will reduce any tax owed.
Revenue has confirmed how employees who received the Pandemic Unemployment Payment or whose wages were subsidised by the Temporary Wages Subsidy Scheme are to pay back any tax liability at the end of 2020. The Revenue Commissioners have advised that workers can pay back the tax owed at the end of the year, or alternatively they may allow Revenue to deduct their tax liability through reducing their tax credits over a four year period. This four year period will commence in 2022.
Previously, employers did not deduct Income Tax from employees who were in receipt of the Temporary Wage Subsidy Scheme. As a result, over the twenty two weeks of the TWSS a tax liability accumulated and this liability has now to be paid to Revenue. Also considered as taxable income is the Pandemic Unemployment Payment which was not taxed at source.
How is this Tax Paid?
Revenue will notify each employee who was in receipt of TWSS and PUP payments by way of a preliminary end of year statement at the end of 2020. This statement will outline the taxpayer’s liabilities. Revenue’s website states “The statement will also provide employees with a preliminary calculation of their Income Tax and USC position for 2020 and will indicate whether their tax position is balanced, underpaid or overpaid for the year.” When employees have accessed their statement, they can update their personal records, declare any additional income and claim other tax credits such as health expenses through myAccount on revenue.ie. The additional credits will reduce the tax liability.
Employees can then choose to pay their tax liability or according to the most recent information, Revenue will collect the liability, interest free, through the reduction of the employees tax credits over four years starting in January 2022.
The Temporary Wage Subsidy Scheme was replaced this month by the Employment Wage Subsidy Scheme (EWSS) which will be in operation until the end of March 2021. Under this scheme, employers are obliged to deduct Income Tax from their employees wages in the usual manner. The minister, Paschal Donohoe has confirmed that the EWSS is expected to cost approx €2.25 billion on top of the €2.8 billion paid out through the TWSS between March and August of this year.
