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Author: Olga Galindo Carazo. 

Keep employees tax info updated

 

The Tax Agency has started a campaign for companies to obtain the data that must be taken into account for the calculation of withholdings in their employees’ paychecks.

The Tax Agency intends to ensure that the withholdings made to employees are adjusted as much as possible to their current personal circumstances.

The nuance is that the circumstances must be “current” compared to the worker’s circumstances at the time of hiring, which was when he/she initially submitted the Form 145, indicating his/her family and personal situation.

What is Form 145.

Let’s start at the beginning.

Form 145 (available for download in pdf format on the AEAT’s own website) is the form by means of which employees inform their employer, the payer of their salaries, of certain personal circumstances, such as their marital status, whether or not they have dependent children, the age of the children and another series of circumstances that the law contemplates and serve to determine whether the IRPF withholding is higher or lower.

It is common that workers hired for the same position and with identical remuneration, receive a different net amount, one higher than the other, for no apparent reason. The only reason is that the personal circumstances of one and the other differ.

Even that the family situation of one and the other, being identical, has been declared in a different way in Form 145. This is not surprising, in fact, because the oft-cited Form 145 entails certain complexity, particularly when it comes to determining the family situation of each one.

When do I have to file Form 145?

It is obligatory to file Form 145 at the beginning of the employment relationship, together with the employment contract duly signed by the employee and the employee, Form 145 must always be filed, also signed by the employee, detailing his family situation, his descendants if he has any and their date of birth, among other details.

From that moment on, it is the employee who must update the Form 145 if any of these circumstances change, if his marital status or the number of members of the family unit changes for the purpose of calculating the IRPF withholding.

What happens if the employee does not update the Form 145?

It happens that there is a discrepancy between the data used for the calculation of the withholding and the data that the employee declares at the time of making the annual income tax return. It is worth the redundancy, what is declared does not coincide with the declaration.

What in fact does not coincide is the amount withheld by the company and the amount that should have been withheld in view of the reality of these circumstances.

The company does not commit any infraction, because it is not obliged to update annually the Form 145, but there is a discrepancy between the amount withheld and the amount that should have been withheld.

In the event of an inspection, the company is obliged to prove that the Form 145 is available, duly signed by the employee and that the employee has not notified any change in these circumstances.

Does it benefit or harm the worker?

Neither one nor the other. Rather, it depends on how you look at it.

If the withholding applied is higher than the amount due, the worker is harmed (due to his or her own lack of skill) by suffering a higher withholding than the amount due in each of the monthly payments. In other words, he/she receives a liquid amount lower than what he/she could have received. However, at the moment of making the annual declaration of the IRPF, there will be a differential quota in your favor that in some circumstances can be an important amount. That is to say, the IRPF will be returned to you and by a lot.

If the withholding is lower than the due one, the worker will be initially favored by suffering a lower withholding, that is to say, he will receive a higher liquid in each one of his monthly payments. The problem will come when making the annual declaration of the IRPF in which it will result a differential quota to pay, in some cases for an important amount. That is to say, you will have to pay the IRPF and by a lot.

What to do with the Form 145?

Workers should be reminded of the convenience of updating the Form 145 when their family situation changes and, perhaps by default, to update the Form 145 with a certain frequency with the entire workforce.

The beginning of the fiscal year can be a good moment to do it, in that case the variation in the percentage of IRPF withholding will not suffer a great variation.

If the update is done at the end of the year, the variation in the withholding percentage can be very large, with a very important effect on the net payroll, which can cause serious problems for the workers if the withholding percentage varies upwards in an ostensible way.

Do you need help? At Cigarrán Abogados we can help you (+34) 91.355.85.15

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