Tax liability for TWSS and PUP Payments
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.
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.
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.
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.
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
- Revenue advice: Covid-19 Pandemic Unemployment Payment Tax Liability
- Revenue confirms Debt Warehousing Scheme is still available, 12 January 2021
"A breath of fresh air. Your firm demonstrated enormous commercial understanding in turning around negotiations with a potential target vendor. I admire your style and ability to drive the deal forward. Many thanks."
"I would like to say I'm very happy with your service, especially the audit team, your staff are always friendly, helpful and a pleasure to deal with."
"Your business approach to clients is very impressive. I have always found that when explaining the types of service on offer, it is always concise and straight forward. The level of trust that clients place in your company and its staff speaks volumes."
"I would like to take this opportunity to say how much we are impressed with your company's professionalism, it has been a pleasure working with you all and we look forward to working with you in the future."
"Avid Partners - Accountants & Business Advisors are an excellent firm of accountants, their quality ethos is outstanding."
"I have dealt with Jamie O' Hanlon, of Avid Partners - Accountants & Business Advisors Chartered Certified Accountants, for a number of years as he is auditor to one of my clients. I have always found him to be professional and responsive in his approach."
"Service is second to none; there is always someone at the end of the phone for any business advice. The staff are very easy to get along with, very approachable and know exactly what they are talking about"
We at Fitzies Bar have worked with Avid Partners - Business & Financial Advisers for over five years. We find that the advice and support offered to us in addition to all of our book-keeping requirements to include payroll, VAT, etc. is invaluable and has helped to contribute to our continued growth especially in these challenging times. I would have no hesitation in recommending Avid Partners.
Jamie and his staff are a pleasure to work with. They respond promptly to any queries we have and are critical to our financial planning and the future needs of our business. I would highly recommend them to anyone interested in accounting services.
We at Stillorgan Cycles have used Jamie and his Team at Avid Partners – Accountants and Business Advisers for over five years. We have found that the retail advice and support offered to us is second to none and has helped to contribute to our continued growth especially in these challenging times. I would have no hesitation in recommending Avid Partners.
I met Avid Partners through a local business networking group. We had been using the same accountants for years and found that in these harsh economic times that we were not getting good enough value or service. We were very impressed by the company's professionalism and enthusiasm and genuine interest in helping us get the most out of our business. As a result we are now clients of Avid Partners and are thrilled with our decision.
After meeting Avid Partners with a view to changing our accountants, we came away with a better deal financially and a feeling that we were in capable hands. We feel that Avid Partners has a personal interest in the welfare of our business. Avid Partners have given us great advice, help and support and respond to our day to day queries with speed and efficiency. We feel it was a great move for us to change to Avid Partners.