HOW TO EASE THE TAX BURDEN ON YOUR COVID CASH BENEFITS

AROUND 419,000 recipients of PUP (Covid-19 pandemic unemployment payment) and TWSS (wage subsidy) were hit with a tax bill last week. Many of them didn’t realise that these payments can give rise to a tax liability.

Here’s a quick Q&A on what’s involved, how much you may owe, whether it’s fair – and finally, how to save yourself even more than you have to pay:

What sort of tax bills are due?

– Under €500 – 43% – €500-€1,000 - 27% – Over €1,000 - 30%

How long do I have to pay up?

NOTHING will be due for a year and then you have four more years to pay.

How will it be collected?

TAX credits will be adjusted (i.e. reduced) over four years, starting in 2022. This means your tax bill should go up by a quarter of what you owe over four years.

How do I know where I stand?

REVENUE has published your preliminary end of year tax statements. This shows how much tax you owe – or is owed to you. The statements are also on the MyAccount facility online.

Owed to me? So there might be good news?

YES. Over 300,000 people have overpaid their tax during the pandemic, including 48% of those on PUP.

Is all this fair?

I don’t think we can complain about having to pay normal tax on wage top-ups or on the most generous welfare payments in the history of the State. Many welfare benefits like pensions, maternity benefit and jobseekers’ benefit are taxed already.

There is an argument that the TWSS should have been deducted via PAYE from the beginning, so people wouldn’t face a shock tax bill but the Government will argue they were trying to put it into effect as quickly as possible and people couldn’t afford to wait.

What can I do to reduce my tax bill?

CHECK that the payments you are due to pay tax on are correct, although the chances are they will be, as employers have gone through a rigorous process already. Also, ensure that you’ve been getting all the breaks and credits that you deserve. The chances are that you’ll be due a tax rebate that outweighs what you owe.

‘Most PAYE taxpayers never apply for all the refunds they are owed,’ says Marion Ryan of Taxback.com. ‘You can claim as far back as four years, so there are tens of thousands of workers out there to whom the Revenue owes money.’

The main neglected reliefs in 2021 are: medical expenses, flat-rate expenses, eworker’s relief, the stay-and-spend initiative and tuition fees.