Tax card question

[reindeer]

Hi,

I need your help with the ordering of a new tax card. The current one that was sent by Vero at the beginning of the year has a limit so that the withholding rate is A% for the total annual income below L and B% for the rest. Because of some current changes in my income (the company pays the Lomäraha and some overwork bonus), my total income so far has almost reached the L limit and that means my salary for the rest of the year will be taxed B% which is very high and as a result I'll not get enough money for my living. So now I just want to order a new tax card somehow so that the withholding rate will be reasonable enough but I don't know how to do that. I logged in to the tax card online on Vero.fi but since I don't have much knowledge about tax and finance, I don't know to change the information there. My question is: how to apply for a new tax card for my income, lets say from next month to the end of the year only so that I don't have to pay B% (can be a different figure but I guess will not as high as B) every month?

Thanks a lot!

[Rip]

How to order

*The online interface is at http://www.tax.fi/taxcard
Sign in with your network banking User ID and Password, or use a microchip ID card issued by the Population Register Centre.
*The telephone service 020 697 050 weekdays at 9.00–16.15.
*By letter — Postal order of a new tax card: Fill out the application form, put it in an envelope and send it to the Tax Administration.
*Visit a tax office in person.

Please note that you are expected to have several facts ready so as to be prepared to answer the questions regarding your projected income etc. For more information, see What information should you have available when you ask for a revised tax card?

http://www.vero.fi/en-US/Individuals/Tax_Cards

[Adrian42]

Hi,

I need your help with the ordering of a new tax card. The current one that was sent by Vero at the beginning of the year has a limit so that the withholding rate is A% for the total annual income below L and B% for the rest. Because of some current changes in my income (the company pays the Lomäraha and some overwork bonus), my total income so far has almost reached the L limit and that means my salary for the rest of the year will be taxed B% which is very high and as a result I'll not get enough money for my living. So now I just want to order a new tax card somehow so that the withholding rate will be reasonable enough but I don't know how to do that.

I fail to see how that would make sense for you:
An increase in L would always also increase A% and B% for the whole year of 2013.
And with a bigger L might result in more taxes being withheld in 2013.

http://www.vero.fi/en-US/Individuals/Tax_Cards

Use the Tax Rate Calculator (http://www.tax.fi/taxcalculator) to check your withholding rate as it should be. If it seems that not enough is being withheld, you can simply ask your employer to implement a higher withholding rate. You are fully entitled to do this yourself. No revised calculation need be performed officially, and you do not have to submit a request to the tax office for a new tax card.

But instead, to lower your withholding rate, or to change the income ceilings printed on your tax card, you have to request a new tax card.

So Vero is saying that when L is too high you need a new tax card (or will get the money back next year), but when L is too low you can simply ask your employer to withhold more taxes.

Assuming your salary was high enough for you to make a living when earning L:
The money you get now that causes you to already reach L should be more than enough for you to make a living with B%.

If you don't want that situation of having to pay B% for several months repeated, you should next year opt for the monthly L instead of the annual L.

[Adrian42]

Let's make an example (no kids, no church, Helsinki):

L=25.000
A=15%
B=34%

L=40.000
A=23%
B=38%
Taxes to pay: 9108,39

If you have 40.000 income with L=25.000:
Taxes withheld: 8.850
Tax bill for 2013 you will get in 2014: 258,39

You cannot simply get A=15% for L=25.000 and then A=23% for L=40.000 - when reaching L=25.000 with an actual annual income of 40.000 you have paid 2.000 (8%) too few on the first 25.000 you got and that is compensated for by the high B%.

When you write "I just want to order a new tax card somehow" you are saying "I want to pay an additional 2.000 to the tax office right now". And you could as well just leave the money on your bank account and use it to make a living with the B%.

[reindeer]

Thank you Adrian42! I would say that an increase to L is unexpected because I supposed to get that money (holiday payment + bonus) at the end of the year as initially agreed. So now L has grown and almost reached the limit for A%. If I have to pay B% for the rest salary then I may not have enough money for things I have planned to do till end of the year. Thus, I would want to lower the withholding rate to below B if possible. Of course, I may have to compensate some money at the end of the year for not paying enough tax but I think that would be fine for me since I need more money for now than at end of the year. Please have a look at the screenshot of the tax card online website when I logged in at this URL: http://s13.postimg.org/dw4c3i7qf/screenshot.png

My next question is: should I update the "Projected annual gross income" (which should be: my income so far (approximately L) + salary * number of months from now to end of year), "Accrued gross income from January 1st" (which is L I guess), and "Tax withheld on accrued gross income from January 1st" (which is A%?) in order to get a new tax card?

Thank you!

[Rip]

I fail to see how that would make sense for you:
An increase in L would always also increase A% and B% for the whole year of 2013.
And with a bigger L you have more taxes withheld in 2013.

It is perfectly possibly, even likely, that OP's main problem is that he paid too little taxes in the first few months of this year, and no matter what must face that painful reality. Still, you can not say that the total withholding is always larger if with larger L. If he manged to set him a en exceedingly low L (let's say 10 000€ annually or less), then actually B would not need be any higher with higher L (up to a level of about 20 000€), while the higher A% rate could be more than enough compensated by the fact that it would be applied to a significantly higher income level.

[Rip]

My next question is: should I update the "Projected annual gross income" (which should be: my income so far (approximately L) + salary * number of months from now to end of year), "Accrued gross income from January 1st" (which is L I guess), and "Tax withheld on accrued gross income from January 1st" (which is A%?) in order to get a new tax card?

Thank you!

Yes. Depending on the date of the period thee are interested L and the amount of taxes (in euros) could be in your payslips. Future salary you of course need to estimate.

[Rip]

Of course, I may have to compensate some money at the end of the year for not paying enough tax but I think that would be fine for me since I need more money for now than at end of the year.

No, you can't expect it to work that way (If i understood you right). The new tax card (calculated based on accurate information) will take into account the taxes you ought to have paid earlier but didn't and make you pay them already this year, starting from next salary.

[reindeer]

Thank you Rip! Any idea about the differences between these two options on the tax card online page?

I request a tax card with separate income ceilings for each pay period.
Start date of the validity of the tax card:

I request a tax card with one single income ceiling for the rest of the year.
Start date of the validity of the tax card (dd.mm.yyyy)

Or the screenshot: http://s3.postimg.org/kooaf3fvn/options.png

[Adrian42]

Thank you Adrian42! I would say that an increase to L is unexpected because I supposed to get that money (holiday payment + bonus) at the end of the year as initially agreed.

Your employer is supposed to pay that to you with your last monthly salary.

So the problem is not the tax office. If you agree to let your employer pay it much later and you don't have enough money for making a living due to that, then that's the problem.

So now L has grown and almost reached the limit for A%. If I have to pay B% for the rest salary then I may not have enough money for things I have planned to do till end of the year. Thus, I would want to lower the withholding rate to below B if possible.

As I already explained, A% was far too low for the amount up to L and the high B% compensates for that.

That is the reason why on your new tax card A% will be roughly the same as B% on your old tax card.

[Adrian42]

Thank you Rip! Any idea about the differences between these two options on the tax card online page?

I request a tax card with separate income ceilings for each pay period.
Start date of the validity of the tax card:

I request a tax card with one single income ceiling for the rest of the year.
Start date of the validity of the tax card (dd.mm.yyyy)

Or the screenshot: http://s3.postimg.org/kooaf3fvn/options.png

You can choose whether you want to have a monthly L or an annual L.

[Rip]

As OP seems to have noticed, the "annual" option may hit you harder if you don't use realistic input numbers. On the other hand, choosing annual is good if you know in advance that you will get considerably less income in the latter part of the year than in the beginning of it.

Tax office recommends using the monthly option if you are unsure.

[Adrian42]

I fail to see how that would make sense for you:
An increase in L would always also increase A% and B% for the whole year of 2013.
And with a bigger L you have more taxes withheld in 2013.

It is perfectly possibly, even likely, that OP's main problem is that he paid too little taxes in the first few months of this year, and no matter what must face that painful reality. Still, you can not say that the total withholding is always larger if with larger L.

When I did the example with numbers I realized that Vero wisely sets B% high enough that unless you extremely overshoot L you usually won't have a big tax bill (or even get money back) the next year.

I had already removed that incorrect statement from my post, but you were too quick to answer.

If he manged to set him a en exceedingly low L (let's say 10 000€ annually or less), then actually B would not need be any higher with higher L (up to a level of about 20 000€), while the higher A% rate could be more than enough compensated by the fact that it would be applied to a significantly higher income level.

Or expressed differently:
When you have a higher income you have a higher tax rate, but you will always get more money after taxes than with a lower income.

[reindeer]

Hi,

I used tax card online to calculate the new withholding tax for the rest of the year and it's somewhere between A & B. You're true about that I am paying less tax than required because I got a raise one year ago but didn't update that to Vero.