Before raising glasses at the New Year’s corporate party, the accountant needs to have time to do a lot of things. Among them is such an annual obligation, as recalculation of personal income tax.
Recall the purpose of mandatory allocation. This is a check of the correctness and completeness of personal income tax withholding from income accrued (paid, provided) to employees in the form of a salary, as well as the amount of tax social benefits (NSL) provided. But the recalculation of aircraft by the norms of the TCU is not provided. Mandatory recalculation at the end of 2019 should be carried out in December 2019.
We conduct it for all employees who are registered with the employer as of December 31, 2019. We will check the correctness of the withholding of personal income tax and salary income in January – December 2019. For employees who are hired in 2019, recalculation is carried out for the period from the moment of reception.
In the mandatory annual recalculation of personal income tax involved only wages. Recalculation of non-salary income to determine the correctness of their taxation is an exclusively voluntary business of the employer / tax agent.
For the purposes of personal income taxation, the legislator classified as such the main and additional salary, other incentive and compensation payments that are paid (provided) to the tax payer in connection with employment relations (paragraph 14.1.48 of the Tax Code). To determine the list of payments that are part of the salary, you can use Instruction No. 5, but only in the part that does not contradict the GCC. So, in accordance with the TCU, some payments that are not included in the wage fund according to Instruction No. 5, for the purposes of taxation of personal income tax, are equated to wages. For example, sick leave (paragraph three of clause 169.4.1 of the TCU) and privileged dividends (clause 170.5.3 of the TCU).
As a general rule, salary payments, including bonuses, surcharges, allowances accrued (accrued / withdrawn) for previous tax periods (months), are finally taxed in the tax period (month) in which they were actually accrued (actually made) adjustments). Relate them to the months for which they were accrued, is not necessary.
For example, if in December of the current year indexation was calculated for the previous months, then the amounts of additional accrued indexation should not be spread over the months for which the adjustment was made. We consider such amounts to be the payroll fund of the month in which they were actually accrued in accounting.
An exception to the above rule is salary for the period of its preservation in accordance with the law, including sick leave and vacation pay. The amounts of such payments (their parts) are attributed to the corresponding months for which they were accrued (paragraph three, paragraphs 169.4.1 of the TCU).
The allocation scheme is as follows.
Step 1. We specify (recheck) the monthly amount of wages accrued (paid, provided) to the employee during the year.
Step 2. If the employee enjoyed the right to NSL, we check the existence of grounds for applying the NSL to the payment in each individual month, as well as the presence at the enterprise of the employee’s statement on his own choice of the place of application of the NSL and documents confirming his right to the NSL (if necessary).
Please note: an employee has the right to NSL at only one place of work. Therefore, if at the previous job in the month of dismissal he was provided with NSL, then when he was hired in the same month, NSL should not be provided. And do not forget that the average earnings of the “soldier of the enterprise” NSL does not apply.
Step 3. If the employee used the NSL, we determine the right of the employee to the NSL in each month of the reporting year. To do this, we compare the adjusted wage amounts calculated for each month of 2019 with the maximum wage that gives the right to NSL.
Step 4. We carry out the final taxation of personal income tax on the adjusted monthly salary amounts (we determine separately for each month of 2019 the amount of personal income tax payable to the budget).
Step 5. We calculate the total annual amount of personal income tax by summing up the monthly amounts of personal income tax received as a result of recalculation.
Step 6. Compare the amount of personal income tax calculated as a result of the recalculation with the amount of tax actually withheld from the employee’s salary for the year, and determine the result of the recalculation.
The result of recalculation of personal income tax can be both underpayment and overpayment on personal income tax. You can also get zero at the output (the amount of personal income tax actually paid = the recalculated amount of personal income tax).
In the first case, if the recalculation resulted in an underpayment of personal income tax (the calculated amount exceeds the actual), we withhold it from the employee’s income for December 2019. In this case, we must take into account the requirements of Article 128 Labor Code of the maximum amount of deductions. Recall that in the general case, the employer has the right to withhold from the amount of taxable income of an employee an underpayment of personal income tax in an amount not exceeding 20% of the salary payable. If the amount of underpayment exceeds the limit, then reflect the balance in f. № 1DF for the next reporting quarters as deduction from the employee’s salary. Alternatively, if the employee does not mind paying off the full amount of the underpayment immediately, he can write a statement stating that he is requesting a one-time deduction. In this case, you can immediately withhold the entire amount of underpayment of personal income tax.
If an overpayment on personal income tax is discovered, then the amount of the accrued tax liability for December 2019 is reduced by its amount. When it is not enough, personal income tax is reduced for the following tax periods (months) until the full return of the unpaid personal income tax to the employee is reduced.
The results of the annual recalculation of personal income tax are reflected in sec. I f. № 1ДФ for the IV quarter as follows:
– if an underpayment has been identified, the indicators in columns 4 “Amount of transferred tax” and 4a “Amount of accrued tax” shall be increased by the amount of the revealed underpayment of personal income tax, taking into account a 20% limit. If the amount of underpayment exceeds the limit, then reflect the balance in f. No. 1ДФ for the next reporting quarters – as the employee is deducted from the salary;
– if an overpayment is revealed by the results of recalculation, the indicators of columns 4 “Amount of transferred tax” and 4a “Amount of accrued tax” are reduced by the amount of excessively withheld personal income tax. If the amount of personal income tax for December was not enough (the amount of the overpayment exceeds the amount of tax liabilities for December 2019), then by the rest of the amount of the overpayment reduce the indicators of columns 4a and 4 f. No. 1DF formed over the next reporting quarters.
Please note: regarding the reflection of the results of recalculation, the tax authorities take a fairly loyal position. So, if according to the results of the recalculation you found errors related to incorrect taxation (for example, you unnecessarily withheld or didn’t withhold personal income tax because you incorrectly classified income, mistakenly applied the NSL), then the result of such recalculation is reflected in f. No. 1DF for the quarter in which the recalculation was carried out. Submission of a refinement calculation for f. Tax authorities in this case do not require No. 1DF. Thus, the annual recalculation and the fact of reflection of its results in f. No. 1 DF will help to avoid penalties.