Will you have to pay IRS this year? Find out how you can do it in installments and learn about some tips to pay less tax in the future.
If getting a refund is always good news, realizing that you have to pay the IRS is no longer a reason to be so happy. Sometimes, settling accounts with the Tax Authority (AT) is an unexpected expense in the budget, but there are ways to minimize this impact.
If you are going to have to pay IRS, this means that the withholding tax – that is, the money that is deducted from your salary every month and delivered to AT – was insufficient to cover the tax on the income you earned. But it may also mean that the expenses you presented to deduct to the IRS were low or underutilized.
Thus, in settlement of accounts between what you withheld from tax and the amount you should have paid, you still owe IRS and will have to pay off that debt.
The information about whether you have to pay or receive IRS is given in the simulation that is made when submitting the return. See on page 45 of this document (in PDF format) how you can do the simulation.
Later, after the declaration has been validated, the information is confirmed by the AT when it sends you a settlement note.
Deadline to pay the IRS
If you have additional tax due to the State, August 31 is the deadline to do so. The payment methods you receive are also indicated on the settlement note, including an ATM reference.
If you do not have the financial resources to pay the IRS within the indicated period, AT allows debts of an amount equal to or less than €5,000 to be paid in installments, without the need to present a guarantee.
However, if the debt concerns the non-delivery, within the legal deadlines, of tax withholdings, this possibility does not apply. If you have other debts to AT, you will also no longer be able to benefit from this payment facility.
How to pay the IRS in installments
Although the AT allows that for debt amounts up to €5,000, you do not have to present a guarantee; payment in installments implies an added cost.
This is because interest on late payment is added to the value of each installment, counted from the end of the period for voluntary payment, that is, from August 31,
The number of installments depends on the amount of the debt but can never exceed 12.
In this table, you can see how AT divides payments according to value.
Amount owedMaximum number
€204 to €350 two
€351 to €500 3
€501 to €650 4
€651 to €800 5
€801 to €950 6
€951 to € 1,100 7
€1,101 to € 1,250 8
€1,251 to € 1,400 9
€1,401 to € 1,550 10
€1,551 to € 1,700 11
€1,701 to € 5,000 12
What to do to pay the IRS in installments?
The request to pay the IRS in installments must be made on the Finance Portal within 15 days after the legal deadline for payment has expired; that is, it must be made by September 15.
To do this, you must follow these steps:
- Enter the Finance Portal and authenticate with your password
- In the free search, at the top of the page, write Benefits
- Choose the Benefit Plans option
- Click on Access
- Choose Registration
- Choose the invoice you want and click on Simulate
- Select the No warranty condition and click on Confirm
- Simulate the plan, choosing the number of installments according to the amount
- In the Economic Reason field, choose one of the reasons from the list that appears
- In Justification of the reason indicated above, you must summarize the Justification for the request
- Register the order.
If you have no other debts to AT, your application is automatically accepted
Every month, you will receive a collection note, and you must, by the end of each month, pay the due installment.
If you fail to pay, the following installments are void, and a tax enforcement proceeding is initiated for the amount owed.
How can I pay less IRS for the year?
The Government has been adjusting the withholding tables to the IRS tables, those that dictate the tax to be paid according to the income bracket so that there are fewer hits when making accounts with the AT.
Even so, as deductions and other income in addition to work are also taken into account for the calculation of the tax, there is almost always room for refunds or payments, even if low.
This means that, although the AT may withhold less or more tax at source, there is always scope for it to pay less IRS or receive more reimbursement (insert a link to an article on IRS reimbursement) (depending on the situation).
And there are two ways to do it: save throughout the year and start from January 1 to think about the IRS of the following year or take advantage of the options given to you when submitting the return.
Three tips to save on the IRS throughout the year
Don’t just start thinking about taxes in February or March. Next year’s income tax return began to be prepared earlier this year. This means that you must, from the first day of the year, ask for invoices with your Tax Identification Number (TIN) so that you can later make the deduction.
Although these deductions have a limit, the truth is that it is not always reached. And often this happens because we forget to ask for an invoice.
In addition to education, health or general and family expenses, take into account expenses by invoice requirement that covers expenses with:
- Maintenance and repair of motor vehicles and motorcycles;
- Accommodation, catering, and similar
- Hairdressing salons and beauty institutes
- veterinary activities
- Purchase of monthly passes to use public transport
- Sports and recreational education, which includes expenses with gyms and sports centers.
In this case, an amount corresponding to 15% of VAT (100% of the VAT in the case of public transport passes) paid by any member of the household is deductible, with a limit of €250 per household. That is, if you spend €100 on hairdressing, you will deduct 15% of €23, that is, €3.45. It may seem like little, but adding up all the expenses throughout the year ends up paying off. Just think that if you spend €1,000 on repairing your car, the deduction will be €34.50. This equates to less tax payable.
And since we’re talking about invoices, another important tip is not to miss the deadline to validate them. Although most e-invoices already appear in the right category, sometimes it is necessary to say whether a certain health expense has a medical prescription or, in the case of companies with several CAEs, specify the category in which you want to insert that expense.
Validating and confirming your expenses is also important to detect and correct any errors that could make you pay more tax.
Taking advantage of the tax benefits provided for PPR or under the Youth IRS, for example, is another way to pay less IRS.
In the case of PPR, you can deduct 20% of the amount applied up to a maximum of €400 (if you are under 35 years old), €350 (from 35 to 50 years old), or €300 (from 50 years old). See more information about PPR on this page from the Insurance and Pension Funds Supervisory Authority (ASF).
The IRS Jovem allows young people in their first job to pay less tax in the first three years of discounts: the reduction is 30% in the first year, 20% in the second, and 10% in the third year.
Three ways to save when submitting the declaration
In this case, the part regarding income and expenses is already closed, and the savings you can make are obtained when filling out and submitting the declaration.
So, even if you are covered by the automatic IRS, you can take advantage of the possibilities given to you to pay less IRS.
One of them is the way couples present the declaration. They have two options: in joint taxation, they deliver only one declaration, with the income and expenses of both. In the separate one, each one delivers his own, declaring the respective income and expenses.
The Portal das Finanças platform presents both options and says, for each of them, how much you have to pay or receive. The taxpayer can choose whichever is more advantageous. The following year you don’t have to keep that option; you can run the simulation again and choose the one that is most convenient for you
The same applies to the declarations of dependents up to the age of 25, who are already working, but who earn less than the national minimum wage. In this case, it is advisable to do the math well and understand whether it is worth keeping the child on the parents’ income statement or if it is more advantageous for him to submit it separately.
If, on the one hand, keeping the dependent gives the right to deductions and to include their expenses, on the other hand, it can make the household move up in the IRS scale and pay more tax. It will be necessary to do both simulations and see which one allows you to pay less.
The option for aggregation or autonomous taxation can also be a way to save on the IRS.
Income from property and capital, as well as the positive balance between capital gains and losses on financial operations, are taxed independently at the 28% release rate.
When you opt for aggregation, these incomes are added to your other income, such as salaries or pensions, to determine the rate to be applied.
By default, autonomous taxation is the one presented in the IRS declaration. And it is usually the most advantageous, but there are exceptions.
For taxpayers with lower incomes, specifically for those positioned in the first two income tax brackets, it may be more beneficial to opt for aggregation. In this case, a rate of up to 23% applies, which is lower than the 28% rate applied to most income from capital, property, and capital gains.
If the rate corresponding to your income tax bracket is greater than 28%, you will have no advantage in including it since a higher rate will be applied to other incomes.
In any case, we advise you to run the simulation and decide what is most favorable for you.