Personal Income Tax (IRPF)

O Income tax (IR) is a declaration required annually by the federal government about the amounts earned by individuals and companies. This declaration must contain all income earned during the last year. As the Income Tax is applied to people and also to companies, it is divided into Individual Income Tax (IRPF) and Corporate Income Tax (IRPJ).

Through this document, the government assesses whether income and expenses are in accordance with taxes that were deducted from that person, both natural and legal, during the year, that is, people must pay in taxes only the amounts that are in accordance with their income and, through this information, the Internal Revenue Service assesses whether the taxpayer should still pay any amount or receive the collection refund excessive.

If you have questions about how the Personal Income Tax works (IRPF), who are the people who qualify to declare it, how the declaration is made and how the refund is received, in addition to other information, see below all about the tax.

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Who must declare the IRPF?

Income Tax Declaration is mandatory for part of Brazilian workers. [1]

All the people who had, during the year, a over-the-ceiling yield determined by the IRS must make the declaration. The current value of the ceiling (2021 year) is BRL 28,559.70, but it can be changed every year. This is the best known rule for IRPF declarations, however there are other criteria that make the declaration mandatory.

See all the people who must declare the IRPF.

• Who had financial income of more than R$ 28,559.70 during the year.
• People who, until December 31, purchased goods (jewelry, cars, houses, etc.) with a total value exceeding R$300,000.
• Whoever sold goods (real estate, vehicles and others) and received payments for them, regardless of the amount, must declare.
• It obtained gross income above R$ 142,798.50 in rural activity.
• He received more than R$40,000 in exempt and non-taxable income or taxable at source (inheritance, indemnities, lotteries, unemployment insurance, donations, savings, etc.).

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What happens to someone who omits data or doesn't make the declaration?

Taxpayers who notice an error in their Income Tax Return have a period of five years to rectify it. However, it is recommended to fix it as soon as possible to avoid falling into the call "thin mesh” or receive a tax action.

When a taxpayer falls into the "fine mesh" it means that the Internal Revenue Service suspected some error or omission in the Income Tax Return, which can range from a simple typing error to an omission of assets. Generally, the taxpayer can get out of the fine mesh by making a statement rectification, but in some cases it is necessary to mark a interview with the tax authorities.

If it is found that the taxpayer has omitted information for his own benefit, he must respond for the action with traffic ticket and run risk, even, of being arrested for tax evasion.

See too: ICMS - Tax on Circulation of Goods and Provision of Services

Who is considered exempt?

All taxpayers who have income below the ceiling of BRL 28,559.70 are considered exempt from paying taxes. In this case, the declaration is not mandatory, but it is recommended that the taxpayer make the Annual Exemption Declaration (DAI) to avoid any problem with their data.

You retirees over 65 who have a monthly income of up to R$1,903.98 beneficiaries are also entitled to exemption from the IRPF, as well as people who receive pensions due to work accidents and those who have an occupational disease.

In addition to these groups, in accordance with Law No. 7,713/88, people with some diseases are also exempt. The diseases considered are:

• AIDS (Acquired immunodeficiency syndrome);
• mental alienation;
• severe heart disease;
• blindness;
• radiation contamination;
• Paget's disease in advanced stages (osteitis deformans);
• Parkinson's disease;
• sclerosismultiple;
• ankylosing spondyloarthrosis;
• cystic fibrosis (mucoviscidosis);
• leprosy;
• severe nephropathy;
• severe liver disease;
• neoplasm malignant;
• irreversible and disabling paralysis;
• active tuberculosis.

People with these health conditions must prove their situation with an official medical report from the Union.

Who are the dependents on the IRPF?

In the Income Tax Declaration, there is a specific field to fill in dependents, that is, people who depend on your income. They can be children, spouses, partners, siblings, grandchildren, grandparents, great-grandparents, parents, in-laws, among others.

However, if a person is declared as a dependent on an IRPF, she cannot make a personal statement. All data, income and expenses of the dependent person must be informed in the declaration. Generally, spending on dependents includes health services, education, goods and property.

The advantage of declaring dependents is being able to reduce the taxes you have to pay and increase the amount of refunds. Each dependent is entitled to a deduction of R$ 2,275.08 in the tax to be paid (value of IRPF 2020).

What can be deducted from income tax?

In addition to the dependents, the taxpayer can deduct from the Income Tax expenses with health, education, contribution to the INSS, donations, pension and private pension. See some examples of deductible expenses below.

• Health: expenses incurred with medical care, such as consultations, exams, hospital admissions and surgeries; treatments such as physiotherapy, psychological and dental care; expenditure on rehabilitation materials, such as wheelchairs, and health insurance payments.
• Education: payment of school fees from kindergarten to high school; expenses with higher education and technical courses.
• Dependents: all dependent's expenses must be declared in the same way, such as health and education expenses. For example:school fees and payment of the dependent's health plan. For each dependent, there is a deduction of R$ 2,275.08 from the taxpayer's tax base.
• Private pension: whether the contribution is deducted from the monthly payroll or made by self-employed workers, it must be deducted from the declaration.

How and when to make the declaration?

Declaration is carried out in the year following the income. [2]

 The period for submitting the Income Tax Declaration usually held between March and April. On the return, you will report your income for the previous year. For example: if you are in 2021, you will declare your income for the year 2020.

To make the declaration, it is necessary to perform the download of the IRPF Program, in the IRS website, to your computer. There is also an option to download the app for Android and iOS cell phones.

Filling in the information within the program is usually intuitive, but if you have questions, the site offers guidelines for the taxpayer.

Another option for those lacking digital skills is to hire an accountant or accounting agency to file the statement. Depending on the amount of information to be declared, this is the best option to avoid errors in the IRPF.

• Simplified statement x full statement

When making the declaration, the Revenue will offer two options for the taxpayer to choose: simplified or complete.

• Simplified: for those who do not have dependents and significant expenses.
• Complete: for those who have more expenses to deduct, such as dependents, and higher incomes, with more invoices proving expenses.

The Federal Revenue's program itself calculates taxes by both modalities, indicating the most advantageous for your case.

See too: Income per capita – economic indicator to measure the socioeconomic conditions of a country

What items must be declared?

Annual income and expenses must be included in the IRPF statement. [3]

Everything you received and paid for during the year must be informed in the declaration, as well as sales of real estate, vehicles, goods and expenses with renovations and constructions. Also included in the list are expenses with health and education items.

In addition to the expenses, the taxpayer must also declare all assets you own in your name until December 31 and their alternative sources of income.

You earnings from profits from savings, investments and other funds should also be mentioned, as well as inheritance receipts, lawsuits, FGTS redemption and others. Even if they are tax free, they must be on the return.

Fees

The Internal Revenue Service has a specific table to calculate how much taxpayers must pay in taxes during the year, according to their income. With this, it is possible to know, through the declaration, if he paid the right amount, if he paid more or less.

Values ​​can be changed according to the year. See the table currently valid (2021 year):

Calculation basis (per month)	Aliquot
Up to 1,903.98	Free
From 1,903.99 to 2,826.65	7,5%
From 2,826.66 to 3,751.05	15%
From 3,751.06 to 4,664.68	22,5%
Above 4,664.68	27,5%

• What happens when the account doesn't close?

If the Revenue sees that you have not paid the sufficient amount of taxes, taking into account the rate on top of your income, you will be informed of the amount you still have to pay.. The Revenue will inform the deadline and all the information for the payment of fees that are still to be paid.

On the other hand, taxpayers who have paid more taxes than they should are entitled to the so-called Income Tax Refund. The amount is deposited in the account informed by the taxpayer during the declaration procedure and the deposits follow a schedule. The refund is done in batches, giving priority to the people who submitted the declaration first.

Taxpayers who fall into the fine mesh will only receive a refund after regularizing their situation.

What is the term “Lion”?

Commonly, when people are going to file their Income Tax Declaration, they usually say that they will “report to the Lion”. This is because since 1979 the Internal Revenue Service adopted the lion as a symbol of the organ. There was an advertising campaign to publicize the IRPF that year and the animal was seen as a good representative, since it is considered a fair, loyal and strong animal.

*The data and values ​​mentioned in this article refer to the month of January 2021 and may be subject to annual adjustments in accordance with the Federal Revenue. All information about values ​​must be confirmed with the Internal Revenue Service.

Image credit

[1] Marcelo Ricardo Daros / Shutterstock

[2] rafapress / Shutterstock

By Giullya Franco