The Tax Authorities will, on their own initiative, continue your provisional refund in a new year. You do not have to submit the request for a provisional refund again. This offers convenience, but you run the risk of a monthly refund that is too high. The Tax Authorities offer convenience by continuing to use the data from the previous year in a new tax year. This means you do not have to submit a request for provisional refund again. The downside is that you have to take action if the refund amount needs to be changed. Will your annual refund increase due to, for example, higher deductible items? Then there is not much to worry about. If you need to get less back, the high refund may mean that you have to pay extra with your annual tax return.
What is a provisional refund?
You must pay income tax on income. The payroll administration will determine monthly how much tax you have to pay on your income. If the employee has deductions, the employer will withhold too much tax. The deductions lower the tax amount. After the annual tax return, which you must submit no later than April 1 of the following year, it will be clear how much money you will receive back. You can receive an advance on the refund you are entitled to by means of a provisional refund. The advantage is that you will also receive money back during the current tax year that you would otherwise only receive after the annual declaration in the year following the tax year in question.
When should I adjust my provisional refund?
The amount of the provisional refund depends on the amount of the deductions and the income. The most important deductible item is the mortgage interest paid. In general, these costs are fairly stable, but differences may occur due to additional repayments and new fixed interest periods. Suppose you repay an additional 15,000 on January 1 in a certain year. The mortgage interest rate is 5.7%. As a result, interest costs will decrease by 855%. This will also affect the amount of the provisional refund, because this 855 is still taken into account in the provisional refund, but you will no longer pay.
How can I adjust the provisional refund?
You can adjust your provisional refund by submitting a new request. This will overwrite the old request and the monthly refund will be based on the new data. You do not have to do this at the beginning of the year, because you can do this at any time. Based on the new data, the Tax Authorities will make a new calculation, taking into account the amounts already paid out and the remaining period of the year. If you send the request during the year showing that the refund should be 250 lower, less will be paid out in the remaining months so that you will not have received too much payment at the end of the year.
Why can the refund amount change?
This can have several causes. The article previously mentioned that an extra repayment results in a lower refund, but you can also consider, for example, a greatly reduced income. As a result, it is possible that an excessively high tax burden has been taken into account in the provisional refund. In case of minor adjustments to your income or deductible items, you do not have to immediately complete a new provisional refund.