The submission of the IRS annual declaration on income earned in 2020 starts this Thursday, extending until June 30, with almost two-thirds of taxpayers being able, if they so wish, to benefit from the automatic IRS.
The submission of the IRS declaration has to be done exclusively electronically, which implies that the taxpayers are in possession of a valid password to access the Finance Portal.
With the extension of the automatic IRS to new types of income, the potential universe of households that can benefit from this automatism this year amounts to 3.5 million.
This year, and for the first time, the automatic IRS will cover workers independent that are in the simplified regime and that last year they issued the corresponding invoices exclusively through the Finance Portal. Estimates suggest that around 250 thousand people will meet these conditions.
Whoever is covered by the automatic IRS has the possibility to refuse this declaration and to choose to complete and submit the Model 3, in case he / she finds any error or non-conformity, namely in relation to the values of the income obtained, the withholding tax or the calculation of deductions.
Since taxation separately is the rule in the IRS, married and de facto partners wishing to be taxed together will have to manifest this intention, which is a necessary option regardless of whether they are covered by the automatic IRS or if they submit the declaration in the usual manner.
The choice of taxation separately or together may dictate different results in terms of reimbursement or tax payable, but each case is different, and the system allows you to simulate both situations before the declaration is submitted.
If the taxpayer covered by the IRS automatic declaration does not validate or confirm it, it is considered as delivered at the end of the term but, in this situation, the separate taxation regime is assumed.
The State Budget for 2020 (OE2020) created two measures with an impact on the tax of workers that will have practical application for the first time with the delivery of this declaration that this Thursday begins.
One of these measures concerns the Youth IRS, aimed at young people who last year had dependent employment income (Category A) of less than or equal to 25.0753 and who benefit from a partial exemption from IRS. This exemption is 30% in the first year with a limit of 3,291.08 euros (7.5xIAS4), 20% in the second year with a limit of 2,194.05 euros (5xIAS) and 10% in the third year.
Access to this benefit is limited to young people between the ages of 18 and 26 who have completed study cycles.
The other measure has to do with the increase of the deduction attributed to the families that on December 31, 2020 had a second dependent under three years. Until now, a deduction of 600 euros has been attributed to each dependent, increased by 126 euros until they are three years old. With the new measure, the increase will be 300 euros for each child up to three years old, from the second dependent.
The IRS declaration delivery campaign will start with the country in general confinement, but this time, the expectation is that the refund will arrive earlier, that is, it will not be necessary to wait until April 21 for the return tax starts to be processed.
Last year, some 5.6 million IRS declarations were filed, 523 thousand of which on the first day.
Only lay-off and support for parents pay IRS
According to ECO, the Tax Authority (AT) has set a rule on the taxation of extraordinary measures of the pandemic crisis. If the support served to compensate for retributions (as the simplified lay-off) is subject to IRS and must be declared in Model 3. If it served to compensate loss of income (such as the stabilization supplement), is excluded from taxation by the IRS and should not be declared.
Thus, workers who were part of the simplified lay-off regime saw part of their wages being reimbursed by Social Security, but that slice is subject to tax. It must be treated as an income from dependent work.
Support for progressive resumption is also subject to IRS. Workers have seen part of their wages be reimbursed by Social Security, but as the support was paid to the employer, it must be declared in Modelo 3 as “Normal salary”, that is, income of category A.
Family support is the third and last of the extraordinary measures subject to IRS.
On the other hand, AT announced, according to Público newspaper, on Wednesday that, after all, it will not apply IRS to the various exceptional supports that were paid in 2020 to workers independent.
In addition to these, support for artists and other cultural professionals, the extraordinary measure of incentive to professional activity and the measure for framing situations of social unprotection will not be subject to IRS.