420,000 people to receive tax bill for Covid payments today
Many payments were not taxed at source last year.
420,000 people are set to receive a tax bill following payments received under the government's Covid payments schemes.
The majority of recipients of the Temporary Wage Subsidy Scheme (71%) and over one third of people (33%) who received the Pandemic Unemployment Payment underpaid tax last year.
Both payments were not taxed at source when set up. Approximately 600,000 people were underpaying income tax or universal social charge (USC) in total.
According to Revenue, workers will receive a tax bill today detailing their amount owed. In total, €458 million will be collected.
Thankfully, this tax bill will not be due as a lump sum payment. Workers will be permitted to pay the bill in one go, or partially, via the Revenue website if they so please. Otherwise, the bill will be collected by reducing tax credits over the course of four years. This reduction in tax credits will commence in January 2022.
"Given that Revenue has confirmed that it will collect any tax owing, interest free, over a 4-year period, this equates to a collection of €1 extra in tax per week for those with an underpayment of €200," said Revenue.
"Revenue is very aware that underpayments could cause financial difficulties for some people and wish to reassure these taxpayers that collection will not start until January 2022, one year from now.
"Also, given the collection of the amount owed will be spread over four years, an underpayment, for example, of €1,000 will be collected in amounts of just under €5 per week."
Elsewhere, preliminary statistics show that around 30% of PAYE earners in fact paid too much tax or USC in 2020. This overpayment amounts to €436 million. 43% of people paid the correct amount of tax.
Workers will be able to view preliminary statements from 2020 on the Revenue website from today.
"This will bring a level of visibility, assurance and certainty to those who were concerned about their end of year position," they said.