Incorrect calculation of the basis for the calculation of social and health insurance contributions - effects in PIT
Pursuant to Art. 26 point 1 sec. 2, the basis for calculating the tax is the taxpayer's income, after deducting the amounts of contributions specified in the Act of 13 October 1998 on the social insurance system (Journal of Laws No. 137, item 887, as amended).
The amounts of social security contributions (retirement, disability, sickness, accident) are deductions from income when determining the tax. After the deduction is made, we obtain the correct tax base. Health insurance (in the amount of 7.75% of its total value) is a deduction from the tax due to the tax office.
However, in a situation where the taxpayer incorrectly calculates the basis for the assessment of insurance premiums, and therefore also the value of premiums, the taxpayer does not have to correct tax returns.
Such a position and steps to be taken by the contribution payer in the event of an incorrect determination of the contribution assessment base was presented by the Director of the Tax Chamber in Łódź in the individual ruling of August 9, 2011 (no. IPTPB2 / 415-203 / 11-2 / MP).
In the cited interpretation, incorrect determination of the basis for the amount of contributions was caused by an incomplete declaration submitted to the contribution payer by the contractor in the scope of his business activity. The Contractor did not declare that he is insured with KRUS for his business activities and that he pays social security contributions there. Thus, there was an underpayment for social insurance and overpayment of health insurance by the contractor. The principal has paid all outstanding contributions from its funds. This situation may be an example of a common mistake made in calculating the contribution base. What should I do in this case?
According to the interpretation, the contribution payer (entrepreneur) should correct the ZUS-DRA settlement declarations and personal settlement reports in the event of an incorrect calculation of the contribution assessment basis. The correction should be submitted for the employee whose employer has incorrectly determined the basis for the assessment of contributions and, as a consequence, has paid the wrong amount of contributions. The correction should take place for all periods when contributions were incorrectly calculated and paid.
No need to correct tax returns
According to the interpretation, no corrections should be made to tax forms issued for previous years. The issued declarations were drawn up correctly and reflected the actual state of affairs in those years, i.e. the amount of collected contributions, and not the amount of due contributions. Therefore, there are no legal grounds for correcting PIT-11 and PIT-4R tax forms for the years in which contributions were paid in an incorrect amount.
Showing income in PIT - 11 for the current tax year
When the payer pays the social security contributions for the employee in the part in which they should be covered from the employee's income, for the employee it is income from the performance of services under the contract of mandate (regardless of whether he still performs the benefit of the payer, the contract of mandate or not). Contributions paid are treated as a gratuitous benefit paid by the employer from his own contributions. The employee's income will be the full amount of social security contributions, which should be financed from the employee's resources and paid by the employer (without reducing the health insurance premium paid by the employee). These contributions, in accordance with the law, should be financed by the employer from their own resources.
From the above income, the payer should collect and pay the advance tax (20%), and present it to the employee in PIT-11, in part E, as income from activities performed in person (including contracts of mandate and contracts for specific work). The income should be shown in the amount of the payment made to ZUS.
This obligation rests with the contribution payer, irrespective of whether the employee would later refund these contributions or not. The date on which the above-mentioned income arises will be the date of payment of overdue contributions by the payer to the ZUS account, i.e. the date of performance of the obligation for the employee.
The obligation to collect and pay the advance payment and issue PIT-11 information rests with the employer in relation to employees who would still perform the mandate contract for the payer. This obligation also applies to employees who are no longer bound by a previously concluded contract with the employer.
Claiming the overpaid health contribution towards social security contributions
In a situation where the payer of contributions has not returned the overpaid health insurance contribution to the employee, but counted it towards social security contributions (in the part in which they should be financed by the contractor), the employee is obliged to add the amount of the contributions credited to the input tax. The addition should be made in the declaration submitted for the year in which the overpaid health insurance contributions were counted towards the social contributions.
Therefore, there is no obligation to additionally prove the above-mentioned health insurance contributions in the PIT-11 information issued for the year in which the crediting took place. There is no obligation due to the fact that it is not income for the employee, the income is the insurance premiums paid by the employer. social. If the employee does not earn any income for the year in which the listed health insurance contributions have been counted towards the National Insurance contributions, then he will not be able to add this contribution to the tax.
Informing the employee that contributions have been credited
If the employer counts health insurance contributions towards due but canceled social insurance contributions, the payer should inform the employee about this fact. Such information is necessary due to the fact that the employee should add to the tax for this year the amount of health insurance contributions. They should be added as they were excessively deducted in earlier years.
As previously explained, in the event of redemption of the amount of social security contributions reduced by the amount of health insurance contributions, he must account for the income shown in the PIT-11 declaration received from the employer. This settlement should be made in the year in which the redemption was made. In such a situation, the employee may not, however, deduct the remitted contributions due from his income. It is not possible due to the fact that in this case the redeemed contributions constitute only the employee's income and not a deduction from the income.
However, the employee has the option of deducting from the income the reimbursement of unduly received benefits (the overpaid health insurance premium deducted by the client). The deduction should be made in the annual statement for the tax year in which the return will be made (PIT-36 form).
In the event of an incorrect determination of the contribution assessment base, no provision of the Personal Income Tax Act imposes information obligations on the payer. The contribution payer should, however, inform the employee about the possibility of deducting unduly collected benefits from the income in the tax declaration submitted for the tax year in which the reimbursements were made. Pursuant to the Personal Income Tax Act, the deduction made by the principal is treated as a refund of unduly collected benefits.
The director of the Tax Chamber in Łódź sums up the situation of incorrect calculation of the contribution base (in 2008-2010) as follows:
- "The existing situation does not impose on the Applicant the obligation to correct the PIT-4R declarations and PIT-11 information issued for the years 2008-2010, because the issued declarations were drawn up correctly and reflected the actual state of affairs in those years, i.e. the amount of insurance premiums collected by the payer social and health care, and not the amount of contributions due, therefore there is no legal basis for their correction,
- paid by the Applicant in 2011 as the payer - overdue social insurance contributions in the amount of PLN xxx constitute a property gain for the former contractor having its source in the revenue from the mandate contract referred to in Art. 13 point 8 of the Personal Income Tax Act, regardless of whether the contractor still performs the mandate contract for the Applicant or not,
- the applicant from the overdue social security contributions for the years 2008-2010 paid in 2011, to be financed by the contractor, with whom the Applicant no longer has a legal relationship, is obliged as a payer to collect an advance on income tax on the terms specified in art. . 41 of the Act (as amended in 2011), that is, taking into account the tax deductible costs referred to in Art. 22 sec. 9 of the Act, i.e. in the amount of 20%,
- the amount of social security contributions not collected in 2008-2010, in the part in which they should be covered from the contractor's funds, and which were paid from the Applicant's funds in 2011, the Applicant is obliged to indicate in the PIT-11 information for 2011, part E . form item 55 in the amount of PLN xxx, and to show correctly applied tax deductible costs in the amount of 20% in item 56 of the form, as well as the amount of the collected advance income tax in item 58 of the form,
- in the case of cancellation by the Applicant to the former contractor of the amount of social security contributions, which should be financed from the funds of the contractor, and were paid from the Applicant's funds, after deduction of overpaid health insurance contributions, the Applicant should inform the contractor about the possibility of deduction by him in the annual tax return for 2011 on the basis of art. 26 sec. 1 point 5 of the Personal Income Tax Act, the amount of the health insurance contribution deducted by the Applicant in the amount of PLN xxx, as an unduly collected benefit returned,
- in addition, due to the fact that the Applicant has credited the health insurance contribution towards the redeemed social security contributions, the Applicant should inform the contractor about the need to add to the tax - in the 2011 annual tax return - this part of the overpaid health insurance contribution, which in 2008- 2010 was tax deductible. This information should indicate that in the years 2008-2010 the deduction of health insurance contributions, in accordance with Art. 27b paragraph. 2 of the Personal Income Tax Act could not exceed 7.75% of the basis for its assessment, while the amount of PLN xxx returned (deducted by the Applicant) in 2011 constitutes 9% of the basis for assessing these contributions. "