Tax liability for TWSS and PUP Payments

January 2021

Workers who received the Pandemic Unemployment Payment (PUP) or whose wages were subsidised by the Temporary Wage Subsidy Scheme (TWSS) will get a tax bill from Revenue this week. 

For those who are surprised to receive this bill, do not panic.

Revenue has stated that the tax liability will not fall due this  year. Taxpayers can clear the total amount if they wish, however you are NOT expected to make a lump sum payment. 

You may opt to pay taxes partly or in full at the end of this year 2021 or, allow Revenue to deduct the liabilities through reductions in your tax credits over a period of two to four years, starting in 2022. Read on for further details.

Who does this impact?

Any worker who was or still is in receipt of PUP or employees whose salary was subsidised by the TWSS.

TWSS was replaced by the Employment Wage Subsidy Scheme (EWSS) on 1 September 2020 and EWSS is expected to continue until 31 March 2021.

Why do I have a tax liability?

Usually Income Tax and USC (Universal Social Charge) are deducted in real-time when an employee is paid by their employer. Both the TWSS and PUP payments were introduced quickly to deal with the impact of the pandemic crisis.

Over the 22 weeks of the TWSS, employers did not deduct income tax payments from their employees wages, resulting in an accumulation of taxes that must be paid back. Similarly, the PUP is considered taxable income, which was not taxed at the source. 

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What does the Preliminary End of Year Statement include?

• Pre-populated information showing the amount of TWSS and/or PUP payment received by the employee according to Revenue records.
• Preliminary calculation of their income tax and USC position for 2020
• Clarity of your tax position – whether taxes are balanced, underpaid, or overpaid for the year 2020.

The amount owed will vary depending on a variety of factors such as pre-payment income, employer top-ups, etc.

Once the preliminary statement is available, employees can update their personal record, declare any additional income, and claim additional tax credits due, such as qualifying health expenses to arrive at their final tax bill for 2020.

Repayment Options

Revenue has stated that tax liability will NOT fall due in 2021,  a relief to many already under financial strain.

Furthermore, although taxpayers can clear the total amount if they wish, you are NOT expected to make a lump sum payment.

The repayment options are as follows:

• Pay taxes partly or in full at the end of this year 2021 or,
• Allow Revenue to deduct the liabilities through reductions in your tax credits over a period of two to four years, starting in 2022.

Or

A third option – your employer MIGHT be able to cover all or part of the liability.  Most employers are already under severe financial strain given the year we have had, so understandably not an option for everyone. Revenue has stated that such payments will not be treated as Benefit in Kind (BIK).

How to Pay

If you want to pay the taxes this year can do so using the MyAccount Portal on the Revenue website.

For those who decide to not pay all or some of the tax owed at the end of 2020, Revenue will collect the liability, interest-free, by reducing the employees tax credits over 2- 4 years. (2022 – 2025)

The reduction of tax credits will start in January 2022.

Self-Employed?

If you are self-employed and availed of the pandemic unemployment payment (PUP) at any point in 2020, PUP is regarded as taxable income. Tax liabilities are handled in the usual way by completing your self-assessed tax return. 

Your tax return may be filed at any time between now and the deadline in October 2021. Tax liabilities will be due at that time.

If for any reason you are unable to pay the outstanding amount, you may be eligible for the Debt Warehousing Scheme.

Under the scheme, outstanding debt may be repaid through a phased payment arrangement at a greatly reduced interest rate of 3% p.a.

Announced as part of Budget 2021, self-employed are allowed to claim the PUP while still earning money through work. Self-employed workers can continue earning up to €480 per month – or €120 a week – without losing access to the Covid-19 welfare payment.

Get Expert Advice

If you do not understand your statement or have any question regarding repayment or any refunds you may be entitled to, please talk to us and we will take you through the next steps.

The main thing is not to panic. Whatever the amount due, you have plenty of time to repay.

Furthermore, remember the preliminary statement is just that and may not include all credits and expenses you are entitled to. Many PAYE taxpayers are eligible for refunds they never apply for. See this as an opportunity to chase up any eligible receipts. You can claim back for the last 4 years if you have not done so already. Examples include:

–              Medical expenses

–              Tuition fees

–              eWorkers relief

–              Stay and spend scheme

We are here to help. Should you have any queries relating to your personal tax liability you can email us at info@avidpartners.ie or call us on 0818 303087

Further Reading:

• Revenue advice: Covid-19 Pandemic Unemployment Payment Tax Liability 
• Revenue confirms Debt Warehousing Scheme is still available, 12 January 2021