In the past years banks and companies give tax related information to the tax authority so for lots of people the online tax form is already 100% filled and correct.
For the past year tax filling I just had to add to the web form renting income, tax deducible donations, and that was it.
Forgot to say that the french tax authority open sourced the (after FOIA-like pressure - called "CADA" in France) code that computes the tax amount from the tax form entries. It was written in a custom language (with documentation):
Do you happen to know whether the CADA pressure came from another branch or agency of the French government or whether it was some sort of transparency advocacy group?
The IRS is not allowed to do this, by law. Intuit lobbied for that law, which made Intuit (and others?) offer a free version. Of course, Intuit goes to great lengths to guide people away from that free version.
Reasons you might need to interact with the income tax system here:
1. You have significant (>€5000) non-employment income.
2. You worked for less than 12 months and are claiming your tax refund.
3. You disagree with the government assessed tax reciept (which is based on what your employer fills in).
For 90% of people then, they don't need to interact with it. Their employer reports their income, deducts an appropriate amount of taxes, and sends it to the government. End of process.
> Their employer reports their income, deducts an appropriate amount of taxes, and sends it to the government.
How does your employer know what "the appropriate amount of taxes" is? In the US I have always had trouble setting this to where I'm not at least 5% off in one direction or the other, and I know more than my employer about what my withholding rate should be.
It's not set by the employee, rather the employer looks at expected income for the year and withholds accordingly. At the end of the financial year, the Tax dept. does a final calculation and if the amount was too high/low, they send you a notice.
Tax deduction at source is a common concept in a lot of countries, incl. dissimilar ones like India and the NL, where I have both worked. Super convenient and frictionless for the vast majority of employees.
> It's not set by the employee, rather the employer looks at expected income for the year and withholds accordingly. At the end of the financial year, the Tax dept. does a final calculation and if the amount was too high/low, they send you a notice.
That's my question, how does an employer or taxing authority know what that amount is? My employer doesn't know my withholding status until I tell them via a W-4, and that doesn't take into account how the appropriate amount to withhold may change due to my spouse's income. Is the taxation scheme just different in most European jurisdictions?
(Taxable income in each bracket * tax rate for each bracket) - (annual tax credits / number of annual payments from your employer).
If you're married and want to be taxed as a couple, you simply send the documentation as such to the tax office after your wedding.
You can tell your employer and they'll try adjust appropriately in payroll, or you can not tell them and the government will send you a tax refund at the end of the year for the partner with the higher tax bracket. It's optional to be taxed as a couple, so presumably you're opting into it because it will reduce your tax obligations, so there shouldn't be a case where you have to pay more because you're married. The same applies for tax credits that you don't want to tell your employer about.
> If you're married and want to be taxed as a couple, you simply send the documentation as such to the tax office after your wedding.
So that's one difference. I have never sent the IRS proof of our marriage, and they have never requested it. I simply updated my wife's name and our filing status in the year we got married.
> (Taxable income in each bracket * tax rate for each bracket) - (annual tax credits / number of annual payments from your employer)
> You can tell your employer and they'll try adjust appropriately in payroll, or you can not tell them and the government will send you a tax refund at the end of the year for the partner with the higher tax bracket.
I'm confused by this. Are tax brackets always individual in Ireland? The reason I need to specify additional withholding is because each of our income withholding calculations starts from the lowest bracket and tops out at a bracket below our actual top marginal rate, which is determined by adding our incomes.
1) far less deductions/carve outs in tax law, or ones that people can use without contacting the tax service. Eg pensions and charity contributions deducted by employer, so tax is calculated. Charity contributions paperwork for one off donations dealt with by the charity (Gift Aid scheme)
2) "tax code" five digits representing your tax status, that the tax office will give your company to update calculations when your status changes. Possibly starting from a phone call from you. Eg using marriage tax laws.
3) tax summary P60/P45 provided by your last employer(required by law) that you can give your next employer so they calculate correctly
Sounds complicated, but it's all geared towards moving the burden to employers who just pay for payroll software, for everybody else it is very simple.
So let's simplify the numbers a bit compared to the actual system:
The tax rates for a single person will be:
30000 @ 20%
remainder @ 50%
You earn 40000. Your spouse earns 20000.
Example 1:
You are taxed seperately. Your employer takes 11000 of your gross and sends it to the government. Your spouse's employer takes 4000 of their gross and sends it to the government. Your total tax payment is 15000.
Example 2:
You opt in to join taxation. Your employers have no idea you are married, but the tax office does (because you sent them documentation to opt in for joint taxation). The government then assesses your tax as a couple and realises your joint income falls into the lower tax bound, and your tax should only be 12000, but you paid 15000. You get a refund of 3000.
Example 3:
Same as above, but you tell your employer. You can add up to min(26300, spouse's income) to your standard rate tax bracket. Your spouse needs to inform their employer to deduct the same from theirs. You tell your employer you are transferring 10000 from your spouse's tax bracket to yours.
Your employer's payroll now works out your tax as 40000 * 20% = 8000. Your spouse's employer works out their tax as 20000 * 20% = 4000. You pay 12000 exactly.
Example 4:
Same as above, but only one of you informed your employer, you committed tax fraud, your employer filled out the form wrong, whatever. You get a tax bill for however much under your tax liability as a pair that your combined tax payments were.
Example 5:
Your income is 25000, your spouse's income is 25000. Regardless of whether you are assessed individually or seperately, your tax is 10000. Your employers deduct 5000 each.
Of course, there's various tax credits you can apply for and you can inform your employer to deduct them from your payments or apply for them at end of year from the government. These can only decrease your tax bill, not increase it, so I'm not sure how you'd end up with an unexpected bill. There's also a higher base standard rate for married person to compensate for not being able to completely share your tax bands for the year (a measure intended to gain some extra tax income from couples with one high earning person and one person with a very small income, I guess).
> How does your employer know what "the appropriate amount of taxes" is?
It's an approximation based on your revenue (and they know how much they'll pay you). At end-year everything is tallied all proper and as taxpayer you either have to pay the missing bits (if you have extra revenues which weren't accounted for by your salary) or you receive a wire transfer from the state (if you had deductions which weren't taken in account e.g. dependents or whatever).
I think I should have left the "End of process." in the quote, because this makes more sense. It's not the end of the process. The taxing authority sends you an estimate, you adjust based on a few factors they didn't account for and send it back.
That still raises the question, though, of how your employer knows enough about your tax situation to not significantly over or under withhold. If my wife and I just relied on the basic IRS calculations on the W-4 and didn't specify additional withholding by dollar amount we would end up owing thousands, possibly over $10,000, the following April (before penalties). How do Ireland and others avoid that?
This is why I specified for 90% of people. Most people don't have significant taxable income beyond employment (their only other income being savings account interest which is handled by your bank by a similar but separate system), so their tax liability is their income tax on their employment.
A lot of people in the software industry specifically might have significant investments, shares, maybe rental income, etc, and then you do need to specifically inform the government about those, but this isn't the case for the 90%.
In France, my employer gets a percentage from the tax administration that they withold from the salary.
If my financial situation changes, I can update my previsional income online
My employer pays all my income (I don’t have any side gigs). Unless I do something unusual like take a few months off for parental leave or similar, they know I make 12x my monthly salary exactly so they deduct my taxes from the table of income tax for someone having my yearly pay. It’s going to be almost exactly correct.
Reasons for deviations on the final tax would be non-income taxes/deductions (selling stock, income or deductions from interest).
If your outside income is predictable and you prefer to do smooth withholding, you should be able to get quite close with W-4 excess withholding instructions.
I just try to make sure I hit the safe harbor withholding amounts every year (100% or 110% of last year's tax liability, depending on income level) and then otherwise just minimize withholdings.
That's what I end up doing. The remaining difference is mostly from unpredictability.
Still, I'm trying to understand how a system like Ireland's, which from this description doesn't have anything like a W-4, works without being significantly off in many cases at the end of the year.
For the tax system it was developped with lots of free software, and support purchased to French IT companies. It was hosted on a big (for the time) linux server farm.
Here are a few interviews and slides by the director of this project, unfortunately in French (didn't check automated translations, might work):
Can't speak for France, but in Ireland this system has been in place since it was done on paper. Most (all?) IT work for the government is contracted out to private companies.
Canada has online filing too. And there is a fully free software (StudioTax), that you can use for up to 20 filings. Its not the prettiest, but I have never paid to file my taxes (except to the gov't of course ;-) ).
https://fr.wikipedia.org/wiki/T%C3%A9l%C3%A9d%C3%A9claration...
In the past years banks and companies give tax related information to the tax authority so for lots of people the online tax form is already 100% filled and correct.
For the past year tax filling I just had to add to the web form renting income, tax deducible donations, and that was it.