Tax rebates and tax deductions reduce tax liability. Some tax rebates apply only for the whole year, others are monthly. Sometimes it happens that employees forget to apply for example a child tax advantage or a student discount during the year. “For this reason, their monthly tax liability is unnecessarily higher. However, the omission can be corrected, either in the calculation of the following monthly tax advance, in the annual tax settlement by the employer, or in the tax return. It always depends on specific circumstances, ” explains.
Two-year deadline for processing the annual tax settlement
In practice, it is often the case that an employee finds that he has paid unnecessarily more income tax in the past year because he did not apply any tax rebate until after the annual tax settlement. In such a case, the employer who made the annual tax return will refund the employee a tax overpayment if two years have passed since the end of the period for filing the income tax statement for the income tax period in which the tax overpayment was incurred.
Which discounts can be applied monthly?
Tax rebates reduce directly calculated income tax while most tax deductions can be applied by employees on a monthly basis. These include, in particular, a basic taxpayer discount, a student discount, a first and second-degree disability pension, a third-degree disability pension, a ZTP / P card and a tax advantage for children. Only for the whole year is it possible to apply a tax discount to the wife or spouse and a child placement discount. In order to be able to apply any of the discounts to the wage accountant, it is necessary to deliver the relevant document confirming the claim for the given discount. Only a taxpayer discount is automatically claimed. For example, if a payroll employee fails to deliver a children’s education certificate and a spouse’s affirmation that he does not apply a child tax advantage, the tax benefit is not taken into account in calculating the net wage and the employee pays more than his duty in the income tax.
Tax overpayment for paperwork costs
When applying tax rebates, the tax liability can be significantly lower. An employee who, in some months of 2015, paid a personal income tax advance higher than his / her duty could still correct his mistake. However, wage accountants must deliver the relevant documents as soon as possible. If an omission occurs prior to the processing of the annual tax settlement, the employer may reduce the personal income tax advance for the employee’s overpayment. The second option is to settle the overpayment in the annual tax settlement by the employer. As a result, a tax overpayment may amount to thousands of Czech crowns, so it is definitely worth paying more attention to self-taxation. The little paperwork needed is worth it. “For example, if an employee fails to apply a tax advantage to two children during a year for three months, he or she will be entitled to a tax refund of $ 7,302 when correcting the mistake,” says.
Tax deductions are always applied for the whole year
Tax-free items, or tax deductions, can always be applied for a full year. Thus, no single item can be used to reduce tax liability throughout the year. Tax deductions, subject to legal conditions, are gifts, interest on housing loans, contributions paid to supplementary pension insurance or supplementary pension savings with state contribution, contributions to life insurance, membership fees paid to the trade union, and fees for examinations for further education and deductible items for blood donation. Employees entitled to any of these tax deductions are offered two options to apply them. Either they deliver the necessary documents proving entitlement to a tax deduction by the payroll manager until February 15 of the following year, or they themselves file a tax return. When processing a tax return, they have more time for the necessary administration. “For example, employees working during the year for two employers or employees earning self-employment or renting can not use the annual tax settlement,”
When do you receive a tax overpayment?
If the employee realizes his / her omission quickly, the income tax advance can be reduced by the next month’s tax refund. If the tax liability for the year is settled in the form of an annual tax settlement, then the tax overpayment of the annual tax settlement is returned at the latest with the March salary. Overpayments incurred on the basis of filed tax returns are returned by the tax office within 30 days of the filing date. The basic deadline is 2 April, so overpayments are sent until 2 May.