.; Each year, the withholding tax rate is automatically updated. In fact, the taxman does it twice: on September 1st or January 1st … Unless you have updated it yourself. In this case, the rate calculated on your initiative remains valid until the end of the current year.
Like most taxpayers who have declared their income online, you have received your tax return in your personal space at www.impots.gouv. Your statement allowed the tax authorities to update the withholding tax rate on September 1. What are the changes to expect on the paycheck? What is your withholding tax rate today?
What is the withholding tax?
– with you (@with you) March 20, 2022
The withholding tax entered into force on 1 January 2019, pursuant to Ordinance no. 2017-1390 of 22 September 2017.
Withholding tax is the deduction of the tax before the income is paid. Therefore, the tax amount is deducted from the paycheck every month. Then the payment is spread over twelve months and the one year delay is removed. In addition, the tax automatically adjusts to the amount of income received.
However, on the side of the declarations, nothing has changed. Each taxpayer continues to declare the previous year’s income to the tax authorities each spring.
The calculation of the withholding tax is based on the data contained in the tax return. Example: income, dependents, deductible expenses, expenses eligible for the tax credit, etc.
– with you (@with you) April 2, 2022
The rate of withholding tax for taxpayers changes every year. Based on the 2021 revenue declared in the spring of 2022, the Direction Générale des Finances Publiques (DGFiP) updates the percentage.
This is a change effective September 1st. The latter may lead to changes in the paycheck from August. The taxpayers concerned can, however, adjust the rate of withholding tax themselves if they deem it useful. In fact, if you have updated it yourself, in this case, the calculation of the tariff on your own initiative remains valid until the end of the current year.
Therefore, without an update from you, it is likely that the withholding tax rate that will be applied to you was automatically updated on September 1st.
It is therefore best to verify that this deduction rate taken from last year’s data (2021 income) still matches your situation and your 2022 income.
What to do to anticipate?
If your income increases this year, it may therefore be preferable to increase your withholding tax rate to avoid having to pay an additional tax in the fall of 2023.
Conversely, if your income has decreased or your tax situation has changed (birth, attachment of a dependent), it is necessary to revise the deduction rate downwards in order not to anticipate too many taxes each month and wait for summer 2023. before getting your refund.
In any case, all you have to do is go to your personal space on the website www.impots.gouv.fr, then on ” manage my updated withholding tax following an increase or decrease in your income Please note that you can only reduce the tax rate if the difference between the planned tax and the new estimated amount is greater than 10%.
So, nothing better than the government simulator to be sure. However, be aware that the administration tolerates an error of assessment of the decline in revenue that can reach up to 10%.
If your income is updated upwards, you need to estimate your net taxable income for the current year. Conversely, in the event of a drop in income, the net taxable income received in year N-1 must also be recorded. And that, plus your estimated net taxable income for the current year.
Upon completion of this online change process, a new direct debit rate will be calculated. Then the tax administration sends it to the organizations that pay you your income. If you are an employee, the new withholding tax rate is usually taken into account quickly by the employer and within a maximum period of 2 months.
A concrete example of withholding tax
Here is an example that will make the whole procedure more concrete:
If your family or financial situation changes at least from January of year N.
- Or immediately report this change to the tax authorities. Therefore, the direct debit rate will be changed within three months, i.e. at the latest in May of year N.
- Or do not declare anything to the taxman. Therefore, your change of situation will only be known when you file your tax return for year N. That is to say in April or May of year N + 1. And, of course, the new withholding tax rate will only take effect in September of year N + 1. Almost 20 months have passed since your actual change of situation.
We therefore advise you, in any case, to declare any changes as soon as possible because there are changes that can be important!