Simplified advance payments for income tax - possibility of reduction

In some cases, entrepreneurs using the tax scale or flat tax may choose simplified income tax advances. Such a solution gives a considerable advantage to business owners, as it provides for more profitable settlements with the tax office. On the surface, everything looks clear, but the inquisitive may ask the question: what if the advances accrued by this method differ from the actual income or even losses? Is it then necessary to pay the tax according to these assumptions, or is it possible to reduce it?

Simplified income tax advances

Art. 44 sec. 6b of the PIT Act gives taxpayers conducting non-agricultural business activity the opportunity to make advance payments for PIT every month in a specific tax year - in the amount of 1/12 of the previously specified income. As already emphasized, the option applies to taxpayers who pay taxes on general terms - either with a tax scale or a flat tax. Entrepreneurs taxed with flat-rate tax forms cannot make simplified advance income tax payments.

When determining the amount of the advance, the operating income from the annual tax return, which was submitted in any of the two previous years, is taken into account. Here, the necessary basis for reference will be the income included in the declaration submitted in the year preceding the current tax year - for 2021 it will be the declaration from 2020 for 2019. In a situation where the tax return does not show income from such activity or the income does not exceed the amount which results in the obligation to pay the tax (below PLN 3,091), then you have to refer to the tax return from two years ago.

And what if the statement did not include the above amount or was lower than PLN 3,091? Then it is impossible to use simplified advance payments for PIT. Similarly, in the case of a taxpayer who undertook business activity for the first time in a given or previous tax year. Another condition necessary to take advantage of the simplified advances is informing the head of the Tax Office. The notification must be submitted in writing, within the time limits prescribed by law. This should be done by February 20 of the fiscal year in which the simplified method was first chosen.

The advance payment determined in this way, i.e. 1/12 of the income determined according to the rules discussed above, can be reduced by the health insurance premium paid in a specific month.

In this case, it is not possible to deduct regular social security contributions from your income.

Simplified advance income tax payments should be made by the 20th of each month for the previous month. The last advance payment for a given year (for December or for the fourth quarter) by January 20 of the following year - unless the annual tax return is submitted earlier and the taxpayer pays the tax resulting from it.

Simplified advances for income tax - reducing their value

Simplified income tax advances should be paid even if the activity in a given year does not generate income or they are lower than those constituting the basis for calculating the amount of advances. This is where art can help. 22 par. 2a of the Tax Code, which says that the collection of tax advances may be limited by the tax office at the taxpayer's request. The latter must, however, make it plausible that the amount of advance payments determined according to general principles would be disproportionately high compared to the tax due on income, which is expected for a specific year. Such a decision is issued by the tax authority after the completed procedure - and it is of a discretionary nature.

Proof of the legitimacy of such a procedure in the case of simplified income tax advances can be found in the general interpretation issued on June 3, 2013 by the Director of the Tax Chamber in Poznań. Although the taxpayer's doubts did not directly cover the issue of using the principle of Art. 22 par 2a of the Tax Ordinance, but the validity of the deduction from the thus reduced advances of the health contribution paid. In the interpretation, the Director of IS in Poznań noted that:

“The income tax advance payment was calculated in accordance with Art. 44 sec. 6b of the Personal Income Tax Act (i.e. in accordance with the rules for determining simplified advance payments - editor's note), while the decision of the tax office issued pursuant to Art. 22 § 2a of the Tax Ordinance, the tax authority only limited the amount of this advance. "
sign. ILPB1 / 415-257 / 13-2 / IM

From the above, it can be concluded that the quoted Art. 22 par. 2a of the Ordinance can also be applied to simplified PIT advances.

To sum up, in a situation where a business owner chooses simplified income tax advances in a given year (after meeting the necessary conditions), and his activity does not reach the assumed amount of income, he has the option to ask the head of the Tax Office to lower the paid advances. The most important thing is to properly justify such a request, show the relevant calculations and propose a new amount of the advance.