People filing their tax returns for this year's tax deadline of November 16 should be careful to declare any Covid supports they received last year, Taxback.com has warned, otherwise, they could unwittingly underpay tax – and end up on the wrong side of the Revenue Commissioners.
The tax refund providers are also advising workers and the self-employed not to overpay tax this year by failing to claim a tax break they became entitled to during the crisis.
Marian Ryan, Consumer Tax Manager at Taxback.com, said there is potential for a Covid-hangover for some taxpayers, or possibly a post-Covid boon for others.
"As Covid restrictions have been relaxed for most of 2022 and many Covid supports were also wound up earlier this year, some taxpayers could forget to declare Covid payments received in 2021 – while others could overlook changes to tax reliefs throughout the pandemic," Ms Ryan said.
In particular, the self-employed should be careful to declare any Pandemic Unemployment Payment or Covid-related sick pay they received in 2021.
The PUP was paid throughout 2021 – but has been closed to new applicants since late January 2022, with the last PUP paid at the end of March.
"So people could forget to declare any, or the correct amount of, PUP received in 2021 as a result," Ms Ryani said.
Taxback.com reports that in 2021 and 2022, PUP was taxed in real time – to avoid a repeat of the situation in 2020 where taxpayers faced big tax bills on PUP at the end of that year.
However, as self-employed individuals are only filing their tax return – and paying any tax due – for 2021 now, they may still have some tax to pay on PUP received in 2021 in this autumn’s tax return.
"A self-employed individual whose only income in 2021 was the PUP and self-employment earnings will not have had a tax credit certificate issued – as would be the case for an employee," said Ms Ryan.
"So when that individual files their 2021 returns and declares the PUP in that return, they most likely will face a tax bill on that payment too. Tax credits however could reduce any tax bill they face on the PUP."
State sick pay could also catch people out. If you were self-employed and received illness benefit from the State in 2021, be sure you declare it at the correct rate in your tax return.
Throughout the pandemic, and indeed up until the end of September 2022, you could get State sick pay - through the Covid-19 enhanced illness benefit - at a rate of €350 a week if you were sick with Covid or if you had to isolate as a result of the virus. However, the maximum illness benefit now available from the State is €208 a week.
Taxback.com has specific advice around tax relief to those filing their tax returns this year.
Landlords filing their returns for 2021 should be careful about claiming tax relief on rental expenses if the property became vacant at any stage that year.
"Many tenants returned to their family home during the pandemic – meaning that some landlords had no tenants in, or rental income being earned on, their properties," said Ryan.
"Expenditure incurred in between lettings is not always tax-deductible. Landlords who moved into an investment property of theirs which became vacant in 2021 should be particularly careful here – even if they only moved into the property for some time. Expenses are not tax-deductible if they arose while the landlord was living in the property."
Landlords who made losses on a rented property in 2021 can carry forward those losses next year and offset them against any rental profit made in 2022.
"The pandemic took a huge toll on landlords – with many landlords losing out on rent in 2021," said Ms Ryan. "So many landlords could be facing a loss on their rented properties for the 2021 tax year. There was a rent freeze and ban on evictions that year and many tenants had fallen into rent arrears because they were out of work. Landlords should remember to carry forward any losses incurred in 2021 when filing their tax return for the tax year 2022."
Childminders should remember they can claim the tax break which allows them to earn up to €15,000 a year tax-free - even if they looked after a child in the child's own home, rather than the home of the childminder, in 2021.
"Normally this tax break – known as childcare services relief - is only available if the child or children are being cared for in the childminder’s own home," said Ms Ryan. "However, this rule was loosened during the pandemic – largely as a result of the stay-at-home restrictions at the time - to allow childminders to mind a child in the child’s own home. This temporary concession came to an end on May 1, 2022."
Employees who worked remotely in 2021 should claim tax relief for working-from-home expenses ahead of this autumn’s tax deadline – if they have not already claimed it.
Remote working relief allows employees to claim tax relief on a certain portion of their electricity, heating and broadband bills for the days they worked from home – if they have not received any, or enough of, an allowance from their employer to cover those expenses.
However, less than one in five remote workers claim tax relief for working-from-home expenses, according to a survey conducted by Taxback.com earlier this year.
"Many people were still working from home in 2021 – so many workers are entitled to tax back for working-from home expenses incurred that year," said Ryan.
Where a self-employed individual is jointly assessed for tax purposes, and their spouse is a PAYE employee, it is likely the couple’s tax credits will have already been reduced to take account of the tax due on any PUP received by the self-employed spouse. So no additional tax may be due on the PUP in such cases.