The new IRS tables, which went into effect this month, will provide virtually all employees and retirees with a larger net benefit every month, through the reduction of withholding tax, i.e. the reduction of advances to the tax authorities. But since there is no effective relief of the tax burden, this means a decrease in the amount of refunds or even the need to return money to the state, when paying the tax, in 2024, relative to the income of this year, according to the simulations performed by Ilya consultant for Dinheiro Vivo (see infographics).
It is especially in the range of gross monthly income between 800 euros and 900 euros that there is a penalty on a refund or even the obligation to deliver part of the cash to the tax authorities on a monthly basis that taxpayers will benefit from the new withholding regime. For example, two married employees, with a child older than six years, who each declare a gross salary of EUR 800 and withhold EUR 28 from the IRS, will no longer withhold any withholding tax, giving a total liquidity increase of EUR 56. Next year, however, this couple will have to pay 119.84 euros instead of the usual refund of 328.16 euros, according to the calculations of the adviser specializing in tax matters.
The same scenario applies to two married pensioners, who earn a gross monthly benefit of 825 euros per pensioner. In June, each family member deducted 47 euros. As of this month, the withholding drops to just three euros, giving a total net profit, taking into account the two pensions, of €64. But this good news is shattered when this family is asked to return 353.34 euros to the state in 2024, while it had previously repaid 158.66 euros.
The accounts were carried out taking into account the maximum annual deduction for general and family expenses, of 250 euros, and rents for own and permanent housing, of 502 euros, excluding other types of expenses, such as health care or education. “Especially in the situation of retirees who tend to have higher drug costs, this type of cost, if withheld, could alleviate the reimbursement penalty,” explains taxpayer Luís Leon, co-founder of Ilya. Please note that it is possible to deduct 15% of the total healthcare costs up to a thousand euros per year.
Despite this nuance, Luís Leon warns that “this new model, by allowing lower retention, i.e. more liquidity at the end of the month, also means that fees for the year will be lower”. “For example, if you have another 50 euros left at the end of the month with the new tables, taking into account the next eight months, including holiday and Christmas allowances, the employee will be reimbursed 400 euros less,” the tax authorities write. officer, who advises “monthly savings for families to cover next year’s expenses, namely with auto insurance or IMI, which are normally paid for with IRS refunds”.
“Less deductions do not mean less tax,” confirms the president of the Bar Association of Chartered Accountants, Paula Franco, to Dinheiro Vivo, which “hopes to soon launch a simulator for employees and pensioners to know how much they are going to deduct”. “The purpose of these tables is to bring the value of advances to the state closer to the actual tax payable,” which is positive, he says. However, he acknowledges that “given people’s expectations, many will feel in their wallets at the time of repayment when they are called to pay”.
Luís Leon believes that “in cases where the reimbursement is reduced, the new scheme fulfills its objective, which is to reduce the withholding, that is to say the advances”. However, the inspector points out that “it is surprising that there are situations where taxes already had to be paid and that the new tables increase that value”, as is the case of two married pensioners with a gross monthly income of 800 euros. each. With the retention costs of June, this couple would have to pay 159.84 euros next year, an amount that, according to Ilya’s calculations based on the new regime that will come into force in the second half, will rise to 623.84 euros. And the same applies to pension income from a couple of 875 euros each, with the return to the State of the undeducted tax expected to increase from 47.06 euros to 223.06 euros. Faced with these situations, Luís Leon admits that “for the year, the government will make some corrections or adjustments depending on the results of the new model”.
Parents with disabled children receive a higher discount
Not all employees will have more liquidity with the new tables, as Dinheiro Vivo has already reported. A single person with a dependent child with a degree of disability equal to or greater than 60% and whose gross salary exceeds EUR 1,118 will receive less at the end of the month because the retention rate rises. The fine varies between one and 161 euros per month, mainly because there is a devaluation of the next of kin, which now counts for 3.5 healthy children instead of five, as it was until June. A situation that the Finance Minister, Fernando Medina, admitted at the beginning of June could be corrected, but without giving any further explanation. Dinheiro Vivo asked the guardian if it would correct the tables so as not to harm single parents or mothers with children with disabilities, but has not yet received an answer.
Source: DN
