14 Jun Airo AV Says: Seven things you should know about your taxes and Covid-19
The Covid-19 crisis could see many workers and unemployed individuals landed with unexpected tax bills – and others tying up loose ends so they’re not hit for tax unnecessarily.
t’s important therefore to understand – and deal with – any tax implications of the pandemic, particularly if your failure to do so could leave you seriously out of pocket. Here’s what you need to know.
YOU COULD FACE TAX ON THE PANDEMIC UNEMPLOYMENT PAYMENT
Those in receipt of the Pandemic Unemployment Payment (PUP) – which was put in place by the Government to support those who lost their jobs in the pandemic – could face a tax bill towards the end of the year.
“Generally speaking, most income is liable to tax, and the amount of tax an individual pays depends on the amount of the income they earn, their personal circumstances and the tax credits they are entitled to,” said a spokesman for the Revenue Commissioners. (Tax credits reduce the amount of tax you must pay on your income.)
“In the main, payments from the Department of Employment Affairs and Social Protection (DEASP) are taxable sources of income – unless they are specifically exempt from tax,” said Revenue. “The PUP is not exempt from tax and is a taxable source of income. Depending on an individual’s overall income during a year, the PUP may affect their overall tax liability for the year. The payment is not taxable at the time of receipt from DEASP – however, the individual will be liable for tax on the PUP amount received at the end of the year when Revenue automatically reviews their tax position. When an end-of-the- year review takes place for a PAYE taxpayer, it may be the case that they have unused tax credits which will cover any tax owing that may arise. Where a PAYE taxpayer owes tax, it is normal Revenue practice to collect any tax owing in manageable amounts by reducing tax credits for a future year or years in order to minimise any hardship. Furthermore, if an individual has any additional tax credits to claim, such as health expenses, this will also reduce any tax that may be owing.”
Details of PUP paid to individuals are usually reported directly to Revenue by the DEASP.
YOU MAY BE ABLE TO BOOST YOUR PARTNER’S TAKE-HOME PAY IF YOU LOST YOUR JOB
If you’re a couple who are jointly assessed for tax purposes and one of you has permanently lost your job, let Revenue know. You may be able to transfer your unused tax credits to your spouse or civil partner. This would increase your spouse or partner’s tax credits and reduce the tax they pay – which in turn should boost the amount of income he or she is bringing into the household.
YOU’RE LIKELY TO FACE A TAX BILL IF ON THE TEMPORARY WAGE SUBSIDY
The temporary wage subsidy scheme (TWSS) was put in place by the Government to limit job losses during the pandemic. Workers on the subsidy could find themselves on a lower wage in 2021 and for some years to come – as a result of a tax bill triggered by the subsidy. Although the temporary wage subsidy is liable to income tax and the Universal Social Charge (USC), it is not taxed through the PAYE system at the time it is received by the employee. “Instead the employee will be 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,” states Revenue in its guidance on the TWSS.
The tax bill you face on the temporary wage subsidy (if any) will largely depend on the number of tax credits you have left for 2020 – and the extent to which your wages have been taxed at the 20pc standard rate of income tax in 2020, according to Norah Collender, professional tax lead with Chartered Accountants Ireland.