TWSS Unexpected 2020 Tax Liability: Article 28 February 2021

Were you in receipt of TWSS in 2020 due to the Covid 19 pandemic.

If so you may have a tax liability due to the revenue but may be unaware of this.

By now you should have received a preliminary end of year statement from the revenue , which will outline how much tax an you owe –

Those who received the two main Covid-19 support schemes ( TWSS and PUP) last year should pay particular attention to this document.

You can access this statement through the MyAccount facility on the Revenue online service to see if there is a liability

We have over the past month been contacted by clients with the following queries

• Why do I owe money to the revenue if my employer was in receipt of TWSS?

You more than likely owe money because the TWSS was not taxed at source.  

TWSS was put in place at the start of the pandemic last March as emergency measures and at the time this was not taxed although at the time some employees were receiving tax back from revenue until they put the majority on the scheme on to a Week 1 basis to limit the amount of tax refunds people were receiving.

The objective of the Government was to get a cash support into the hands of workers as quickly as possible - and rightly or wrongly, it was decided not to tax the payments in real-time through the PAYE system. the scheme operated from 26 March to 31 August 2020

• What sort of tax is to be paid on the TWSS?

The subsidy payments under the TWSS are liable to income tax and USC.

Tax on the TWSS received by employees is not liable to PRSI.

Even though no PRSI is payable, employees will be deemed to have made their PRSI contributions - which will help preserve their social welfare benefits and entitlements.

• What about the Employment Wage Subsidy Scheme?

TWSS was replace by the EWSS , the Employment Wage Subsidy Scheme (EWSS) from the 1^st September 2020. The subsidy was and still is taxed through the PAYE system , which means , if you're on the EWSS you don’t need to worry about receiving tax bills in relation to these payments.

• When do I have to pay this tax?

Revenue has confirmed that this tax liability will not be due this year.

Although the option is available for taxpayers to fully or partially pay any liability through the 'Payments/Repayments' facility on your online account with Revenue, people are not expected to make a lump sum payment.

Instead, what will happen is that Revenue will collect the full or any remaining liability, interest free, by reducing tax credits over four years, starting in January 2022.

• What do I have to do now?

First have a look at the statement received from the revenue and review the figures to ensure they are correct and in line with the TWSS payments received from your employer.

Taxpayers are asked to file an income tax return to finalise the tax liability or tax refund.

Filing a tax return gives taxpayers the opportunity to claim credits or tax reliefs to offset or reduce any tax due on the TWSS for exaplne medical expenses. 

There is a dedicated section on Revenue’s website setting out the various tax credits and reliefs which may be due to individuals.

Revenue are encouraging  people to claim their tax credits and reliefs for the previous four years, if they haven’t already done so to put against any liability due.

Revenue has said it will be writing to all TWSS recipients on a phased basis over the year to request that a tax return is completed.

• How much could I owe?

The amount of tax you may owe will depend on a number of factors, including your personal circumstances and the number of weeks you received the TWSS.