Managing Your COVID Tax Liability
- January 6, 2021
- Posted by: Raymond Gibbons
- Category: Business Support
When the COVID Pandemic Unemployment Payment (PUP) and the Temporary Wage Subsidy Scheme (TWSS) were first introduced we advised all clients at the time to ensure their staff knew that these payments would be taxable.
Both payments are liable to income tax and USC. The TWSS was not taxable in real-time through the PAYE system. Instead TWSS payments made to the employee are liable for tax and USC on the subsidy amount paid to them by their employer by way of review at the end of the year to be carried out by the Revenue Commissioners.
These reviews are now under way and the Revenue Commissioners will notify you of any tax liability due.
If you have a tax liability the Revenue Commissioners have announced;
- That workers affected by COVID-19 will repay the taxes owed on the Pandemic Unemployment Payment (PUP) and the Temporary Wage Subsidy Scheme (TWSS) over a four year period, beginning January 2022.
- Employees will also be given an opportunity to pay their income tax or USC liability (either in full or partially) to Revenue directly.
- In January 2021, every employee in Ireland will receive a Preliminary End of Year Statement which will display the amount of TWSS or PUP payments they received. The statement will also provide a calculation of income tax and USC charged to each worker over the course of 2020, and determine whether there has been any over or under-payment.
- Workers will then have the opportunity to repay their tax liability.
- If an employee declines to pay the tax bill, Revenue will collect the liability, interest free, by reducing their tax credits over a period of four years in order to minimise any financial hardship.
With the continuation of the TWSS to the end of August 2020, and to mitigate the possible impact on the employee at the end of year review, revenue placed all employees that received payments under either the TWSS or the DEASP Pandemic Unemployment Payment on a non-cumulative Week 1 basis.
It is hoped that this measure will reduce any additional tax burden for the tax payer by utilising unused tax credits.
Employees can access information on their earnings and tax liabilities directly through the My Account facility on ROS. Here they can;
- Pay their income tax or USC liability to Revenue directly through the My Account facility on ROS.
- If the employee chooses not to pay in full. Revenue will collect any tax owing in manageable amounts by reducing an individual’s tax credits over a four-year period in order to minimise any hardship.
Sole Traders & Company Directors
If you are a sole trader or the owner of a company your tax liabilities will be calculated as normal by submitting the annual Form 11 Self-Assessment form for the self-employed.
If this is you, then you might consider getting your information into your accountant earlier than normal so that you can plan accordingly for any tax liability that might arise.
Follow this link for more information on why preparing your accounts and income tax return early is best practice.