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The account is simple: fewer discounts per month for the IRS will mean less reimbursement in 2022.
With the updated 2021 income withholding tables, taxpayers will have a more generous salary at the end of the month, but a thinner check when tax authorities settle the following year.
Simulations by the consulting firm Deloitte show that the amounts that disappear from the reimbursement are identical to those resulting from the sum of the monthly savings with the lowest rates.
For a single taxpayer, without children and with an annual gross income of € 15,400 (€ 1,100 / month), you will receive a tax check for € 304.42 in income for 2020, but you will only be entitled to € 258.22 in 2022 for income 2021. For the same household but with a zero gross income of 56 thousand euros, the amortization cut can reach € 336.
Fees reduction
For a family with two owners and two children and a gross annual salary of € 30,800, the reimbursement can be reduced by € 252.
“It is important to alert taxpayers that the 2021 IRS ‘final bill’ will only be received in 2022 (usually July) and here taxpayers will have lower IRS refunds,” Deloitte cautions. Withholding taxes is an advance made to the State, a forecast of how much each worker pays the tax.
But it can also be the case that taxpayers who, having reached the limit of one of the tax levels, have to pay the IRS.
Workers and pensioners with a monthly income of up to € 686 will not deduct every month from the IRS. The Secretary of State for Tax Affairs defined that it is only from this amount that withholding occurs. During this year, the limit was € 659 per month. This update should also reflect the expected increase in the national minimum wage.
But the reduction in the rates of the retention tables is for everyone, on average 2%. And also for retirees, but only for those who earn up to € 686 per month. In the rest, the rates are maintained, since there is a greater correspondence between the withholding and the final amount of the tax to be paid. The adjustment in the lower pensions is made to reflect the extraordinary increase of € 10 in January, preventing them from being taxed.
The IRS withholding tables to be applied in 2021 will allow for a slight increase in monthly liquidity. Deloitte simulations point to an average reduction of 2%. The Government guarantees that this measure implies giving up 200 million euros of income that remains to families.
Specific cases
In fact, the monthly savings are, in some cases, residual. For example, a single taxpayer without children and with a gross monthly income of € 685 makes a profit of € 69 cents, or € 9.80 per year. For this same aggregate, but with an income of € 1,100, the monthly saving is € 3.30, which corresponds to a total of € 46.20 at the end of the year.
In relative terms, it is in a household with a holder, a dependent and € 700 of gross monthly income where savings are most significant, with a reduction in withholding of 12.5%. But that does not correspond to many euros in the wallet. According to the simulations, it represents another € 9.80 at the end of the year, or 70 cents each month.
In the case of a family in which both elements work, with two children and a gross monthly income of € 1,750, the new tables give another € 7 at the end of the month or € 98 at the end of the year.
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