People who have received payments under the Pandemic Unemployment Payment (PUP) and Temporary Wage Subsidy Scheme (TWSS) are to receive bills for any tax they owe as a result in January.
Revenue said it will issue a Preliminary End of Year Statement to all employees, including those who received the TWSS and PUP, at the beginning of next year.
"The Preliminary End of Year Statement will include pre-populated information showing the amount of TWSS and/or PUP payments, if any, received by the employee concerned according to Revenue records," Declan Rigney, a spokesman for Revenue, said.
"The statement will also provide employees with a preliminary calculation of their income tax and USC position for 2020 and will indicate whether their tax position is balanced, underpaid or overpaid for the year," he added.
The employees concerned will then be given time to amend their records if needed, declare any further income and claim additional tax credits due to them.
These might includes credits for things like health expenses or flat rate expenses.
Once the adjustments have been made through Revenue's online MyAccount function, a final liability for this year will be calculated.
The employees will then be able to pay what they owe Revenue in full or in part through MyAccount.
"Otherwise, Revenue will collect the liability, interest free, by reducing the employees tax credits over four years to minimise any hardship," Mr Rigney said.
"The reduction of tax credits will start in January 2022," he added.
The issue of a potential tax liability on TWSS and PUP payments arises because in general most employee income tax and USC is deducted in real-time time by their employer.
However, given the rapid introduction of the income support measures earlier this year in response to the imposition of Covid-19 restrictions, it was not possible to put a system to allow this to happen in place.
As a result, in the case of some recipients, income tax and USC will be due.
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Meanwhile, Revenue has also confirmed that it has processed €12.1m in "sweepback payments" on behalf of almost 2,700 employers under the new Employment Wage Subsidy Scheme.
Under the EWSS, employers registered for the scheme can make a claim backdated to 1 July.
This measure was introduced to allow newly or seasonally hired workers to qualify for the wage supports.
Employers have been able to claim "sweepback payments" since September 15 and the first claims have already been processed.
"These payments are now in the nominated bank account for the majority of those employers," said Orla Fitzpatrick, head of Revenue's Medium Enterprises Division.
"Employers who wish to claim a subsidy on behalf of eligible employees for July and August can still do so by submitting their applications through ROS before 14 October. Applications will be processed weekly up to that date."
36,700 employers have registered for the EWSS.
The Minister for Finance has welcomed the news from Revenue that any tax liabilities that arise for people who were receiving the PUP or TWSS payments will be collected over a four year period beginning in 2022.
"I am confident that because of the very progressive income tax code that we have here in Ireland, in the vast majority of cases, the expected tax liability will be very small and will in many cases be associated with the operation of the wage subsidy scheme," he said.
But he added that the facility is now there from Revenue to deal with it over a period of four years, thereby significantly easing any potential burden that may arise to any who have availed of the scheme.
The Finance Minister said he does not have a figure as to what the total liability is likely to be at end of the year, but it would be small in overall terms.
He added that he does not think an amnesty would be an appropriate way to deal with the matter.
Mr Donohoe said he expects the number of companies registered for the EWSS will increase as we approach the end of month returns submitted by employers to Revenue.
"This now means that over 82% of employers who were availing of the Temporary Wage Subsidy Scheme when it finished up in August, have now applied to the Employment Wage Subsidy Scheme," he said.
He said this is a really considerable take up and would offer continued support to hundreds of thousands of workers from August into September of this year.
Mr Donohoe also reminded employers that the scheme remains open to them for applications into the future should the time come when support is needed.
The cost of the EWSS would be €2.25 billion up to next March, he said.
