PAYE customers – End of year process

What to do in an underpayment position

Your Preliminary End of Year Statement may indicate that you have an underpayment of Income Tax or Universal Social Charge (USC).

Reasons for an underpayment

There are a number of reasons why this can occur. These include:

  • 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.
  • Reduction or removal of a tax credit and the additional tax due was not fully collected during the tax year.
  • A change in your pay frequency. For example, a change from being paid weekly to fortnightly.
  • 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.
  • If your Illness Benefit payment(s) were not fully taxed during the tax year.
  • Receiving Pension or Benefit payments from the Department of Social Protection (DSP):
    • DSP income not accounted for during the tax year;
    • Where there was an increase in payments from DSP and these were not fully taxed during the tax year.

More information is available in the section on taxation of DSP payments.

What you need to do

If you are in an underpayment position, you may be entitled to additional tax credits and reliefs such as health expenses.

You will need to complete your 2020 Income tax return online through myAccount to:

  • claim additional tax credits or reliefs
  • declare additional income.

The additional information that you provide may impact your final income tax or USC position.

How to settle underpayments

You can also arrange to make a payment to settle any underpayment through myAccount. If you are not in a position to pay the outstanding amount, Revenue’s systems will automatically collect underpayments. This is done, interest free by reducing your future tax credits over a number of years.

Any underpayments arising for 2020 will be collected over four years, starting in January 2022.

myAccount is the single access point for all our secure online services for PAYE taxpayers. It is the quickest and easiest way to manage your tax affairs.