- TWSS and EWSS considered a taxable form of income
- However, payments were not taxed at source
- Most full-time workers in receipt of pandemic payments face tax bills from 2022
- Taxback.com can help your staff to reduce their tax liability
Since their introduction in March, more than 65,000 employers and over 550,000 employees have availed of the COVID-19 Temporary Wage Subsidy Scheme (TWSS) or Employment Wage Subsidy Scheme (EWSS).
Through these schemes, employers continued to pay qualifying employees using the usual payroll process and were then reimbursed by Revenue (to a maximum of €410 for each staff member).
However, unlike typical salary payments, income tax and USC were not deducted at source from TWSS or EWSS payments made to employees.
With this in mind, Revenue has announced that workers in receipt of these payments must repay the taxes owed over a four-year period, beginning January 2022.
This development will have no doubt come as a major shock to many workers across Ireland.
A recent Taxback.com Taxpayer Sentiment Survey revealed that more than half of COVID support payment recipients were not aware that they would incur a future tax liability.
Employees will have the opportunity to pay the amount owed to Revenue directly. However, if an employee declines to pay their tax bill, Revenue will collect the liability, interest free, by reducing their tax credits over a period of four years.
'Squeezed middle' to be worst affected
The impact of the pandemic payments can vary considerably depending on personal circumstances and certain cohorts of workers will be affected more than others.
The good news is that those on low incomes (below the income tax threshold of €16,500) should be largely unaffected. However, those with incomes between €35,000 and €70,000 (previously labelled "the squeezed middle") are likely to suffer a major financial blow.
Pandemic payment tax liability case studies
|Salary||Estimated income tax underpayment|
Hospitality Sector Worker
Retail Shop Assistant
Chief Operating Officer
How to reduce your employees' tax bill
Revenue has enabled employers to pay their employees' 2020 tax liabilities if they wish.
In order to pay your employees' tax bill you can:
1) Provide funds to each employee to cover their tax bill. Individual employees will then be responsible for paying their liability to Revenue
2) Amend your final payroll submission of 2020 and add additional 'IT paid' and 'USC paid' to match the liability shown.
In both cases listed above, each employee will be required to complete an Income Tax Return for 2020.
Claiming tax relief
After what has been a difficult year in almost every sector, many employers may find themselves in a position where they cannot cover tax liabilities for their employees.
Such employers can instead support their staff by taking measures to ensure they are aware of the various types of tax relief that can be claimed to reduce their tax bill.
A wide range of tax reliefs – such as medical and flat rate expenses, tuition fees, e-worker relief and more – are available to be claimed by eligible workers.
The average Irish tax refund is €1,076. As we have outlined above, this would substantially reduce, if not remove entirely, the tax owed by many employees.
However, countless workers are unsure of exactly what they can and can't claim. The result is thousands of euro in tax relief going unclaimed every year.
This is where Taxback.com can help your staff.
How Taxback.com will support your employees
Tax filing services
Our team will conduct a full four year tax review for each employee, ensure they are claiming every tax relief they're entitled to, file their tax return and minimise their tax bill (your employees may even be entitled to claim a tax refund!).
Online tax clinics
We will host a 60-minute online tax clinic exclusively for your staff. In this webinar, we will cover everything your staff needs to know about claiming every relief they're due and minimised their COVID tax liability.
24/7 tax guidance
We will offer 'round the clock tax guidance to each employee through their personal account manager, email support and 24/7 tax help from our Live Chat team. Finally, we will also provide a series of helpful tax filing guides for you to share with your staff.
Learn more about our service
To find out more about how Taxback.com can help your employees to reduce their pandemic payment tax liability, contact our team today here.