Thousands of Irish workers may be forced to unwrap a tax bill of up to €2,828.59 this Christmas.
According to official Revenue figures, over 1 million employees have been in receipt of either the Temporary Wage Subsidy Scheme (TWSS) or the Pandemic Unemployment Payment (PUP). Each of these workers will potentially incur a tax bill as the COVID-19 payments were not taxed at source.
The year-end tax bill will come in addition to any drop in income employees may have suffered during the lockdown.
The official statistics indicate that, since it was introduced in March, over 551,800 employees have had their pay subsidised by the Temporary Wage Subsidy Scheme, while 517,600 have received the PUP.
The latest Taxback.com Taxpayer Sentiment Survey has revealed that more than half (57%) of respondents receiving either the TWSS or PUP payments were not aware that a future tax liability could potentially be in the pipeline.
With that in mind, we've put together this guide to outline everything you need to know about these payments and what to do if you have a tax owing at year end.
What are the pandemic payments?
Pandemic Unemployment Payment (PUP)
The government introduced a 'COVID-19 Pandemic Unemployment Payment' – of €350 per week for employees and self-employed people who have lost their employment due to the coronavirus outbreak.
In order to be eligible for the payment you must be:
· an employee or self-employed immediately before Friday 13 March 2020
· aged between 18 and 66
· unemployed or be temporarily laid off from work
· living in the Republic in Ireland
Temporary Wage Subsidy Scheme (TWSS)
The purpose of the Temporary Wage Subsidy Scheme is to keep employees registered with their employers and to enable employers to continue to pay wages during the pandemic.
In short, employees with a previous average net pay of up to €412 per week (roughly €24,400 per year) receive a subsidy of 85% of their previous net weekly pay.
A payment of up to €350 applies where the employee's net weekly pay is between €412 - €500.
A 70% subsidy is payable where an employee's previous average net weekly pay is more than €500 but not more than €586, with maximum cap of €410.
In order to qualify, an employer must:
· declare to Revenue that they have experienced a minimum of 25% decline in turnover (between 14 March 2020 and 30 June 2020) due to the pandemic
· be unable to pay normal wages and normal outgoings fully
· keep their employees on the payroll
· only claim for employees that have been on the payroll on 29 February 2020 and have made payroll submission on their behalf to Revenue in the period from 1 February 2020 to 15 March 2020.
What are the tax implications of the COVID-19 payments?
Both the TWSS and PUP payments are considered taxable forms of income.
However, the payments were not taxed at source.
This means that most full-time workers in receipt of TWSS or PUP face tax bills of between €150 and almost €3,000 at year-end.
Sample case studies:
Varying degrees of impact
The impact of the pandemic payments can vary considerably depending on personal circumstances.
The good news is that on those low incomes that are below the income tax threshold should be largely unaffected. In addition, those whose employer didn't top-up the TWSS payment will have incurred a lower income during the pandemic, but should now also have a lower tax liability at the end of the year.
Meanwhile, a worker on a salary of €35,000 will have a larger underpayment of tax at the end of the year, than someone who earns €38,000. This is because the €35K workers' employer will get a TWSS of €390.62, where as a €38K salaried worker is only entitled to a payment of €350.
Of course, certain cohorts or workers will be affected more than others. It would appear those previously termed, as "the squeeze middle" with incomes between €35,000 and €70,000 are likely to suffer a major financial blow.
What to do if you have a tax liability
Workers can reduce the impact of the pandemic payments by ensuring they avail of all of their tax credits and reliefs.
By applying with Taxback.com, you can carry out a full four-year review of your tax situation.
Their tax team will examine your entitlements and ensure you are claiming everything you are due.
The average Irish tax refund a Taxback.com customer receives is €1,076 so it is definitely worth checking how much you're owed.
Why apply with Taxback.com?
· Easy online process – no complicated forms
· You'll avail of every credit or relief you're entitled to
· They will maximise your tax refund or minimise your liability
· 24/7 Live Chat tax support
The average Irish tax refund is €1076.17