This April, the Inland Revenue will start sending draft tax returns to taxpayers with the data it has on the 2020 tax year. The draft tax return, which can be confirmed quickly and swiftly, is the main tool that many citizens use to comply with the obligation to file their tax return. The pandemic and the economic crisis have also affected this area of our lives. In this article we review the most common errors in the draft tax return.
Many people who are used to the data being correct may make mistakes when confirming it without making any changes.
There are common errors that we should not fail to review in order to avoid overpaying taxes or making mistakes in the IRPF that can lead to penalties.
Errors in the tax draft:
- Errors in personal status, omitting changes that have occurred.
- Omissions of deductions to which you are entitled.
- Failure to deduct mortgage payments.
- Omission of second homes.
- Failure to offset capital gains and losses on different investments.
Do I have to file a tax return if I have been on ERTE?
Yes, if you have two payers (your employer and the SEPE) you must automatically make the declaration. There are rumours that the Inland Revenue will make changes in this respect but nothing has been published as of the date of publication of this article.
The Inland Revenue also omits regional deductions such as the one in Catalonia for those affected by ERTE, so correcting these errors in the draft can change the result in your favour.
Changes in personal situation
If you are married, divorced, have had or adopted a child or now have a dependent relative, the chances are that the Inland Revenue will not reflect these tax changes.
If you are married and have the option of filing jointly or individually, it is critical to evaluate both options to see which gives a better result which can change from year to year. Often new clients come to us with the argument that “We always do it separately as it is better value for money” without considering that perhaps now you are not earning a salary and this makes a joint income more beneficial.
Change of address
If you have moved during this year, now is the time to report the change of tax address if you have not already done so. Remember that it is your obligation as a taxpayer to report these changes.
If you are entitled to the deduction for the purchase of a primary residence, you can deduct part of the mortgage payment, which is generally included in the draft, but also other expenses. The draft usually omits other deductible expenses such as life insurance or home insurance linked to the loan that are deductible in the IRPF.
Omission of regional and state deductions.
This is by far the most serious omission from the draft because applying deductions correctly allows you to pay less. Deductions that you can lose if you approve the draft without checking it include:
- Deduction for the purchase of a home.
- Deduction for renting a home (the Inland Revenue will alert you that it exists, but does not apply it by default).
- Deduction for donations.
- Deduction for birth or adoption (regional).
- Deduction for investment in newly created companies.
- Deduction for school expenses.
- Deduction for investment in pension plans (you will always have to include it).
- Deduction for health insurance (if you are self-employed).
- Special deductions due to the pandemic.
Data on main and second homes
It is essential to check the properties included in your tax return, especially when there is more than one. Indicating the address, use and value of each one correctly can avoid surprises in inspections. Second homes are taxed in the IRPF as an imputation of real estate income that we must verify is well calculated.
Capital gains and losses on your investments
As we discussed in the article on cryptocurrencies, investments of any kind can affect your income. If, for example, you have money in shares but have not sold them, you do not have to pay for the accumulated gain, it is when you get the money back that you have to include it as a loss or gain, as the case may be. The same also applies to investment funds, ETFs, and savings insurance, among other products.
This is especially relevant in the case of losses, which you can carry over from previous years or losses you have had in this year that you can offset in the future. The tax authorities do not include any of this in the draft.
In summary, the tax data and the draft tax return provided by the Inland Revenue is undoubtedly a good tool for citizens, but confirming it in a hurry without checking anything is always a bad idea. Do not hesitate to contact us for more information.