Easy way To pay Your Tax Bill
The glow of Wage Subsidy supports has been dimmed with the arrival of tax bills. What if there was a solution to mitigate those liabilities without impacting other taxpayers?
Many beneficiaries of the Temporary Wage Subsidy Scheme and Employment Wage Subsidy Scheme were taken by surprise when they received tax liability statements.
It should be noted that Revenue made it clear all along that these payments were not tax free and that many people could face a tax bill at the end of the year. This was due to the way the scheme was implemented.
While the TWSS was paid through normal payroll, tax was not deducted.
Revenue has done its best to soften the blow. The bill doesn’t fall due until 2022 and people have four years from then to pay it off. That will certainly help people in employment.
However, there is an alternative way to get rid of the tax bill.
You could back date a pension contribution for 2020 and use the tax relief to negate the tax bill.
Let’s assume your tax bill is €2,000 and you pay 40% PAYE.
The process is as follows;
Make a Pension Contribution before October 31st 2021 of €5,000.
Make your claim for tax relief through your personal tax return.
You will receive Tax relief back from the Revenue of €2,000.
This €2,000 is used to pay the tax bill.
Yes, it will cost €5,000 to get rid of a €2,000 tax bill but at least you still have the €5,000 in your name.
Please note your pension is not accessible until age 60 and tax relief is not automatically guaranteed.