It is possible to make mistakes when filling out tax returns. However, according to the financial administration, taxpayers regularly make some errors in their declarations. How are they and how to avoid them?
Incorrect application of tax reliefs
The Directorate General of Finance (GFR) pointed out that the errors mainly occur in the application of tuition fees, reductions for dependent children and spouses.
The amount of this discount is usually applied incorrectly. The amount of the maximum applicable in kindergarten depends on the setting of the minimum wage for a given year. Although the minimum wage has increased to 16,200 CZK this year, last year’s minimum wage is decisive for the tax return, because this year we are filing a tax return in 2021, when the minimum wage was CZK 15,200.
As we always point out about this discount, the indicated amount of CZK 15,200 is not a generally applicable amount of the discount, but its maximum limit. The actual amount of the reduction you can apply depends on the amount you actually paid to the so-called kindergarten in the preschool institution. That is, the amount you have on the document issued to you by the operator of the establishment.
Discount for a child
According to the GFR, in the event of tax advantages (reductions for a child), both parents claim the reduction for a dependent child. In fact, only one of them can claim the discount. The other, on the other hand, must provide proof from the employer that he does not apply the child reduction. In the case of self-employed workers, this is attested by a sworn statement.
The discount for a child in 2021 is:
- reduction for the first child 15,204 CZK (1,267 CZK per month) – no change,
- reduction for the second child 22,320 CZK (1,860 CZK per month),
- reduction for the third and subsequent child 27,840 CZK (2,320 per month).
If your child holds a ZTP/P card, the tax benefit is doubled:
- reduction for the first child ZTP / P 30 408 CZK (2534 CZK per month) – no change,
- reduction for the second child ZTP / P 44,640 CZK (3720 CZK per month),
- reduction for the third and next child ZTP / P CZK 55,680 (4,640 per month).
Since employees claiming the child reduction on a monthly basis did not qualify for the highest reduction in the year 2021, the tax settlement difference will be calculated. If the employee cannot ask the employer to pay the taxes (for example because he also has business income), he must file a tax return, where he will take into account the reduction not applied more raised for children.
Reduction for a female dependent
Taxpayers often make mistakes when claiming a dependent spouse because they don’t include everything they should in their tested income. You can apply this reduction only if the spouse did not have income above CZK 68,000 for the whole year.
For the purpose of applying this discount pursuant to Article 35ba paragraph 1 letter b) ZDP include for example:
- all “gross” income from employer, business, rent, etc.,
- all types of retreats,
- sickness insurance benefits (sickness, maternity allowance – i.e. maternity allowance, breastfeeding allowance),
- salary compensation in the event of incapacity for work,
- Unemployment benefits,
- compensation bonus.
These are just examples, as the law in the mentioned section defines exactly what income is included in the dependent wife’s income. do not include (Complete list):
- state social aid (e.g. parental allowance, maternity allowance, etc.),
- reception allowances, with the exception of the remuneration of the foster parent,
- services for the disabled,
- services in case of material need,
- care allowance, social services,
- State contributions to supplementary pension insurance with state contribution,
- State contributions to supplementary retirement savings,
- state contributions in accordance with the Housing Savings Act,
- scholarship granted to students preparing themselves permanently for future professions,
- income from caring for a close relative or other person who is entitled to care allowance under the Social Services Act, which is exempt from tax.
Income from salaried activity for the year 2021, which was paid at the end of January 2022, is still included in the income for the year 2021. Only the benefits paid for the year 2021 are included in the social benefits.
In the case of spouses who have property in the joint property of the spouses, the spouse’s own income does not include income which accrues to the other spouse or which is considered to be income of the other spouse for the purposes of the income tax.
Incorrect application of non-taxable parts of the tax base
Errors are also repeated for the non-taxable parts of the tax base. According to the financial administration, they are claimed, even if there is no legal claim. For example, interest on a mortgage granted for housing is applied in practice by those who do not own the property or to finance real estate which is not used for permanent housing, but, for example, only for recreation or rental.
You can deduct from the tax base an amount equal to the interest paid on:
- building savings loan,
- a bridging loan granted by a mortgage company,
- a mortgage granted by a bank,
- a pre-mortgage and accessory loan granted to a mortgage loan.
It should always be about financing housing needs. The term permanent housing is used here. Permanent address is not the same as permanent residence. The taxpayer does not need to be registered for permanent residence here. Housing needs must be used for permanent housing purposes and not for commercial, recreational or rental purposes. If the property is only partially used for permanent residence, interest will only be applied in a proportional amount, explain in the article Dagmar Kucerovapublisher of the sister server Podnikatel.cz, provided that it is necessary to prove the need for accommodation.
Housing needs are defined in the provision of § 15 paragraph 3 and the proof of the right to deduct the non-taxable part of the tax base in the provision of § 38l paragraph.
In connection with the deduction of interest on a mortgage, it should be remembered that for certain taxpayers, a reduced ceiling for the deduction of interest on housing needs will be applied for the first time. The limit has been increased from CZK 300,000 to CZK 150,000, but only if the housing need has been satisfied from January 1, 2021 (the date of acquisition of the housing need, not the conclusion of the loan agreement, is decisive).
For housing needs acquired before the end of 2020, the right to deduct interest remains unchanged. However, if you increase the loan with additional funds, for example for a reconstruction completed after January 1 of this year, a new limit will already apply to you.
According to the GFR, taxpayers are also often confused about covid support. For example, if financial assistance is taxed and if it is included in the spouse’s income.
|Receipt received||It is taxable income||It is included in the spouse’s own income|
|Single contribution to retirees||No||No|
|Nursing for the self-employed||No||Yes|
|Operating grants related to Covid – 19||Yes||Yes|
|Antivirus for freelancers with employees||No||Yes|
Source: Directorate General of Finance
Income tax refund
Taxpayers often make mistakes when completing the overpayment claim portion of the form. In such a case, the declaration must be signed and completed not only in the declaration of this information, but also in the part of the request for refund of overpayment at the very end of the declaration.
There are two documents, namely a tax return and an application for refund of overpayment, and both of these documents must be signed, highlighted Hana Barakova, spokesperson for the Czech Republic’s Financial Administration, stating that overpayments begin to be processed and paid only after the deadline for filing declarations (within 30 days, i.e. after April 1), and that this also applies to taxpayers who have filed tax returns in advance. This does not apply in cases where the tax office initiates the control procedure or where the taxpayer files a tax return late.