How to submit a PAYE Income Tax Return
What to do if you have underpaid Income Tax or USC
Your Statement of Liability may indicate that you have underpaid Income Tax or Universal Social Charge (USC). This means that you owe Revenue money for unpaid tax or USC for the year you completed your Pay As You Earn (PAYE) Income Tax Return.
Reasons for an underpayment
There are a number of reasons why you may have underpaid tax, for example:
- Your employer or pension provider may not have used the most up-to-date Revenue Payroll Notification (RPN). This may have resulted in incorrect tax credits or standard rate cut-off point being applied to your income.
- There may have been a deduction or removal of a tax credit and the additional tax due may not have been fully collected during the tax year.
- There may have been a change in your pay frequency. For example, a change from being paid weekly to fortnightly.
- There may have been a change in your employment during the year which has resulted in you receiving more than 52 weeks tax credits or rate band against your income.
- The death of a spouse or partner, separation or divorce was not advised to Revenue. This would mean an adjustment to your tax credits or rate band was required.
- If you were in receipt of pandemic wage subsidy supports such as the Temporary Wage Subsidy Scheme (TWSS) or Pandemic Unemployment Payment (PUP) that were not fully taxed during the year in 2020.
- Your Illness Benefit payment(s) may not have been fully taxed during the tax year
- or
- you may have received pension or benefit payments from the Department of Social Protection (DSP) which resulted in:
- DSP income not accounted for during the tax year
- or
- an increase in payments from the DSP which were not fully taxed during the tax year.
Further information is available in the section on taxation of DSP payments.
How to settle underpayments
Where you have an underpayment of Income Tax or USC of less than €6,000, you will have the option to:
- pay your liability partially or in full through the ‘Payment/Repayments’ card in myAccount
- or
- have the full or remaining liability collected, interest free, by reducing your future tax credits from 2024 over a maximum period of four years.
For underpayments in excess of €6,000, a notice will issue setting out the amount owed.
If you wish, you can pay the amount owing through the ‘Payments/Repayments’ card in myAccount. Should you wish to discuss repayment options that best suit your particular circumstances, you can contact us through MyEnquiries.
Information will also be included on your Statement of Liability explaining how the liability will be collected.
- Example 1
Maria completed her Income Tax Return for 2020 in October 2022. This has resulted in an underpayment of tax of €312. This will be collected by reducing Maria’s tax credits over four years as shown below:
Amount to be collected in each year
| Year | Amount to be collected |
|---|
| 2023 |
€78 |
| 2024 |
€78 |
| 2025 |
€78 |
| 2026 |
€78 |
The table below shows the reduction of Maria’s tax credits depending on how often she is paid:
Reductions of tax credits
| Pay Frequency | Amount to be collected |
|---|
| Weekly |
€1.50 |
| Fortnightly |
€3.00 |
| Monthly |
€6.50 |
- Example 2
Mark completed his Income Tax Return for 2021 in September 2022. This has resulted in an underpayment of tax of €200. This will be collected by reducing Mark’s tax credits over four years.
Mark would prefer to pay the €200 in full. He can make this payment using myAccount. This means that Mark will have the full credits he is entitled to at the beginning of 2023.
Next: Do you need to submit a tax return?