Wednesday , December 2 2020

be careful before you waste your tax credit



In Bercy, countdown is triggered: more than 55 days prior to applying the withholding tax (or PAS). In late January, your income tax will be deducted directly from your salary or pension.

Approximately 8.85 million households will also be entitled to a nice check. Because, as announced by Prime Minister Philippe in September, taxpayers receiving credits or tax cuts will receive a 60% down payment from January 15th. This down payment represents a total cost of € 5.6 billion for the state. The balance will be paid to taxpayers in the summer. In order to benefit, no administrative action is required, said Secretary of State Accounts, Gerald Darmanin, on Tuesday.

If you are a beneficiary, be careful not to waste the money very quickly because some may have to return a few months later.

"Tax credit at source"

The taxpayers involved in this deposit are those who benefit from the following reductions or credits: childcare costs, homeworking, EHPAD accommodation costs, investment in rentals (Pinel, Duflot, Scelliet, DOM, Censi-Bouvard), donations and trade union fees. In administrative terminology, these are "tax deductions at source".

These costs must be recurrent, in other words, they must happen every year. Until today, taxpayers, when benefiting from a tax credit for several years, were accustomed to modifying their monthly payments to take into account the tax credit. With the withholding tax, because the rate of contribution can not be changed by the taxpayer. The government has decided to pay taxpayers a large down payment for significant credit and tax cuts earlier this year to prevent them from making excessive cash payments to the state.

Money back in the summer of 2019

Problem, some homes may have stopped in 2018 to meet those costs that qualify for credit or tax reduction. And the administration will not notice until the spring of 2019, when taxpayers have completed their income tax return in 2018.

However, the administration will have already paid an advance of 60% in January, calculated in relation to the amount reported in the previous tax return (which relates to 2017 revenue and hence the costs of the same year that give rise to a credit or tax reduction).

Taxpayers in this situation will have to return the full amount received in January in the summer of 2019.

For example, if you donate to an association relatively relevant amount for several years, you have the right to a tax reduction. If you do not donate in 2018, tax authorities will still give you a 60% deposit in January 2019 (when you are not theoretically eligible). When you submit your income tax refund in the spring, you will discover that you have not made these costs in 2018 and will ask you to return it in the summer of 2019.

The taxpayer could not be returned earlier

Gérald Darmanin will write a letter to all taxpayers at the end of December. A specific version will be sent to those who benefit from these reductions and recurring tax credits to prevent them, if they find themselves in this situation, from having to reimburse the administration.

In good faith, the taxpayers concerned may want to return the administration immediately so they do not have to keep the amount paid in January through the summer. Impossible Bercy answers. They will have no choice but to keep the money warm for six months.

Finally, with the withholding tax, "the tax is adjusted to your life" and the tax credit also, but not 100%. Direct devaluation of the tax credit, when expenditure is incurred, is not feasible so far, "for technical problems," explains Gérald Darmanin. The General Inspectorate for Finance is working on proposals to build such a device, but "we will not do it next year", warned the minister, or even by the end of the five-year term.


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