Entrepreneur-employee tax settlement
A common practice is when entrepreneurs running their own business also take up full-time employment. Then on the part of the employer the question arises how to account for such an employee? Whether to deduct the tax-reducing amount when calculating the tax
Employee-entrepreneur taxation obligation
A full-time employee who additionally undertakes business activity, both from an employment relationship and from business activity, is required to calculate and pay an advance income tax payment. However, on behalf of the employee, the employer pays the advance for the income tax on behalf of the employee, and the entrepreneur fulfills this obligation on his own.
Therefore, the workplace collects tax on revenues obtained from the employment relationship and pays it on behalf of the employee to the tax office. On the other hand, the entrepreneur pays the advance for tax on account of the conducted activity in the tax office competent for the address of residence. The deadline for making advances in both cases is the same and expires on the 20th of each subsequent month.
Advances for an employee - entrepreneur and the amount reducing the tax
When calculating the advance payment for income tax in accordance with the general rules (progressive tax, otherwise the tax scale), the amount reducing the tax is taken into account, which in 2013 is PLN 556 02 gr. When calculating the advance on income tax for an employee, 1/12 of this amount is deducted each month.
Also, the principle of calculating an advance on income tax on account of the conducted activity allows for the tax reduction amount to be taken into account. Therefore, running a business and additionally working full-time, the amount reducing the tax would be taken into account twice. This is incorrect because each taxpayer is entitled to a tax-free deduction only once in each tax year, regardless of the number of sources of income.
According to the regulations, an employee-entrepreneur cannot give up the deduction of the amount reducing the tax when calculating the advance on income tax on account of his sole proprietorship, but may resign from taking into account the amount reducing the tax when calculating the tax on remuneration under the employment relationship and this is what he should do .
Flat tax, registered lump sum, tax card
The situation is different when an employee-entrepreneur in his business activity has chosen a form of taxation of income obtained on this account other than the general rules. If the activity is settled with a flat tax, registered lump sum or a tax card, the calculation rules of which do not include the tax-free amount, there is no need to resign from the deduction of the tax-reducing amount with the tax deducted from remuneration received for full-time work. Therefore, when employing an employee who additionally conducts activities subject to flat tax, the employer, when calculating the advance on income tax for an employee, takes into account 1/12 of the amount reducing the tax every month. An employee grants such a right to the employer by notifying him that he does not run a non-full-time business activity for which the tax value would be fixed on the basis of the tax scale.
Notification of an employer's business activity by an employee - entrepreneur
An employee - an entrepreneur, like other employees, is obliged to perform formal activities related to submitting forms and documents when taking on employment. One of them is the employee's declaration for the purpose of calculating monthly advances on personal income tax, the so-called PIT- 2.
This declaration will be submitted only by an employee-entrepreneur who has chosen a form of taxation of business activity other than the tax scale, i.e. who settles accounts with the Tax Office on the basis of a flat tax, registered lump sum or tax card. If, on the other hand, an employee-entrepreneur chose a company for settling the activity with a tax scale, he cannot submit a PIT-2 declaration to the employer. Then he reports to the employer that he conducts taxable activity on general principles and resigns from deducting the amount reducing the tax when calculating the income tax advance paid by the employer for the employee.
In practice, it may also happen that a full-time employee has decided to start a business and wants to settle income tax on general principles. In this case, also taking into account the amount reducing the tax must take place in the activity. Therefore, the employee-entrepreneur should notify the employer that the former PIT-2 is no longer valid and that from the moment of starting the business, he resigns from taking into account the amount reducing the tax by the employer. The part of the reduction amount that has already been paid will correct the annual tax return. In the case of an employee-entrepreneur who accounts for both titles according to general rules, one PIT-36 declaration will be submitted at the end of the year, which will take into account both the income from the activity and from the employment relationship.