If you received a lower or higher salary than usual at the end of the year (or the beginning of 2024), it makes little sense to blame the government of the day or your employer. The reason for any change in net salary should be sought in the recalculation of tax withholding at the end of the year.
The employer must make corrections regarding the withholding taxes to be applied to its employees as “withholding tax liability” by February 28, but the recalculation is usually made with the December payroll (may be paid at the end of the month or in the first days of January, depending on the situation). Recalculation of these withholdings (or credits) in the payroll is generally stated under the heading “withholding tax adjustment”; this amount must correspond to the difference between the net withholding tax and the amount already paid.
What is the correction in tax withholding and why is it made at the end of the year?
OK, but in short, what do we pay? In short, the employer calculates at the end of the year how much the employee has to pay between IRPEF, tax and various contributions, and how much is actually paid in the payroll in each month of the year. The transaction therefore serves to determine the amount of annual tax, since the employer only knows the gross taxable amount of the employee in December and, on the basis of this, can calculate the exact amount of Irpef, as well as municipal and regional surcharges.
If it is true that these taxes are in fact deducted from payrolls every month, there may be factors (e.g. changes in salary, but the reasons may be different) that affect the estimate of how taxes are calculated throughout the working year. It is calculated and paid according to your bracket through Irpef.
Amounts are withdrawn in December: the employer calculates the withholding amount based on actual gross income and also takes into account deductions from employment or family members. During the tax regulation, the so-called “additional taxes”, that is, the taxes that must be paid to the Municipality or the Region depending on the place of residence, are also determined.
To simplify it, we can say that while we pay taxes during the year according to the estimate, the employer can actually calculate how much we owe to the treasury with the year-end payroll. If more “taxes” were paid during the year than were due, the employee would have a credit and therefore his paycheck would be higher. However, if the total tax due is higher than the amount already paid, the missing amount will be deducted from your paycheck.
Source: Today IT
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
