Advance payment for income tax - payment rules
Income tax advance payment may cause some concern among novice entrepreneurs - it is necessary to make a payment, and there is no declaration documenting it. It is worth getting to know the detailed rules of paying advances, so that the lack of declarations is no longer a surprise and a cause for fear.
Advance payment for income tax - declaration
Until the end of 2006, entrepreneurs were required to document their income tax with a declaration. In the case of the tax scale, it was the PIT-5 declaration, while in the case of the flat tax - PIT-5L declaration.
As of January 1, 2007, the obligation to prepare periodic income tax returns was withdrawn. Entrepreneurs only pay the calculated advance payment to the tax micro-account (for which the identifier is NIP), in the title, enter its type and month - e.g. PIT for 02/2019. If the advance payment for a given period did not occur, payments are not made, and this is not reported to the tax office.
By what date should the advance income tax be paid?
An entrepreneur may make advance payments for income tax on a monthly or quarterly basis. The deadline for the advance payment of income tax, both in the case of general rules and flat tax, is the same.
The date of payment of the monthly income tax advance payment is the 20th day of the month following the month to which the advance payment relates. On the other hand, the quarterly advance payment should be made by the 20th day of the month following the quarter to which the advance relates.
So, for example, an entrepreneur should pay an advance on income tax for January by February 20. However, the advance payment for the first quarter - until April 20. If the 20th day of the month is non-working, the advance payment should be made no later than the first working day following the 20th day of the month.
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No advance payment for income tax below PLN 1,000
If the value of the advance payment does not exceed PLN 1,000, the taxpayer may decide to postpone its payment, but does not have to comply with the earlier deadline on the 20th day of the following month after the given settlement period. In other words, an advance payment to the tax office will not be necessary when the tax due on the income earned from the beginning of the year, less the sum of the advance payments, does not exceed PLN 1,000.
Mr. Jan runs a sole proprietorship on general terms. Income tax is settled on a monthly basis.
In January, the advance for the income tax was due in the amount of PLN 500. Due to the fact that it does not exceed the statutory limit of PLN 1,000, Mr. Jan does not pay it to the office.
In February, the advance payment was due in the amount of PLN 700, i.e. the total value of the advance payment for January and February exceeds PLN 1000 (PLN 500 + PLN 700 = PLN 1200). Therefore, Mr. Jan has to pay to the Tax Office the equivalent of both advances, i.e. PLN 1,200. However, in such a situation, no interest will arise on account of late payment of the advance payment for January, as the taxpayer was not obliged to pay it earlier.
In the following month, the advance payment is PLN 500. Mr. Jan is not obliged to pay this advance payment again until the total amount of unpaid advances exceeds PLN 1000. This is due to the fact that the tax due on the income earned from the beginning of the year, less the sum of advances paid from the beginning of the year, did not exceed the statutory limit.
Advance payment for income tax - calculation rules
The advance for income tax is calculated on the basis of revenues reduced by the costs of obtaining them. Importantly, the advance payment is calculated cumulatively from the beginning of the tax year. This means that, for example, in May, all revenues and costs are taken into account, starting from January of this tax year until May.
The income tax is finally settled by means of the annual PIT declaration, submitted at the end of the tax year. In the event that the taxpayer settles on general principles or with a flat tax, the deadline for submitting the return is April 30 of the next tax year.
An alternative to the above methods is a simplified advance income tax advance payment. It is paid in the same amount throughout the tax year, but its determination requires additional formalities.
Including ZUS contributions in advance income tax
The income tax advance payment is reduced by the social and health insurance contributions paid. This means that, for example, the advance on income tax for February can be reduced by contributions for January (paid in February). In addition, these advances may be reduced by the losses incurred in the previous 5 tax years (not more than 50% for a given tax year, and if the loss has arisen from 2019, it can be settled once up to a limit of 5 million or 50%).
When deducting ZUS contributions in advance payments for income tax for a given tax period, it must be borne in mind that some deductions are reduced by the income itself (e.g. social contributions), and some by the directly calculated tax (health contributions in the deductible part, i.e. 7.75% from the basis of the dimension). It should be remembered that advance payments for income tax for a given month or quarter are calculated taking into account the revenues and costs accumulated from the beginning of the year, and not only for the period being settled.
In addition, the advance income tax is reduced by the amount that reduces the tax, which in 2021 amounts to PLN 525.12 per annum, provided that the amount of income does not exceed PLN 85,528. After exceeding the 1st tax threshold, the amount reducing the tax is not included in the calculation of the advance payment at all, and the possible adjustment is made in the submitted annual tax return.
In 2021, the tax-free amount on an annual basis is PLN 8,000. This means that taxpayers whose tax base is less than PLN 8,000 will ultimately not pay the tax.
In the case of taxpayers taxed using the tax scale, in 2020 the tax reduction amount is:
PLN 1,360 - for the tax base not exceeding PLN 8,000;
PLN 1,360 reduced by the amount calculated according to the formula: PLN 834 PLN 88 x (tax base - PLN 8,000) ÷ PLN 5,000, for the tax base higher than PLN 8,000 and not exceeding PLN 13,000;
PLN 525.12 - for the tax base higher than PLN 13,000 and not exceeding PLN 85,528;
PLN 525.12 less the amount calculated according to the formula: PLN 525 12 gr × (tax base - PLN 85 528) ÷ PLN 41 472, for the tax base higher than PLN 85 528 and not exceeding PLN 127 000;
PLN 0 - for an amount exceeding PLN 127,000.
The above calculation rules should be applied only when preparing the annual tax return for 2021.