Tax Overpayments and Underpayments: No Automatic Offset

Many Polish taxpayers find themselves in a precarious financial position during tax season, grappling with the simultaneous obligation to pay outstanding taxes and the anticipation of receiving tax refunds. This complex situation, where the tax office and the taxpayer have mutual financial obligations, is not handled with the automatic netting that commonly occurs between private individuals. Instead, the Polish tax system often requires separate transactions, adding a layer of complexity and potential financial strain.

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This is a good solution, but it is advisable to verify whether the office saw the application and whether it was assigned correctly. There have been cases where applications 'got lost' and were not properly taken into account.

This issue commonly arises for individuals filing different tax forms, such as the PIT-37 for employment income and the PIT-38 for capital gains. A taxpayer might be due a refund from their employment income after utilizing various deductions or joint filing, while simultaneously owing additional tax from stock market activities where insufficient advance payments were made. The solidarity tax on high earners also contributes to this complexity. The ideal scenario, where the tax office automatically offsets these amounts, is rarely realized.

While taxpayers can submit a formal request to have their overpayments credited towards their tax liabilities, this process is not without its pitfalls. Tax advisors, such as Anna Misiak from MDDP, caution that it is crucial to verify that the tax office has received and correctly processed these requests, as instances of lost or improperly applied applications have occurred. Joanna Narkiewicz-Tarłowska of Vialto Partners recalls even more severe cases where tax authorities initiated enforcement proceedings despite pending offset requests.

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Sometimes, in such situations, enforcement proceedings were even initiated. One could file a request for the transfer of these amounts, but tax authorities did not always agree to it.

Furthermore, the calculation of the offset amount can be complicated by factors like late payment of advance taxes, which incur interest. If taxpayers do not calculate these interest charges themselves, the tax office will, potentially affecting the final offset amount. This highlights a systemic issue where the lack of automated compensation mechanisms places an additional burden on taxpayers, requiring them to navigate a complex administrative process to manage their tax obligations effectively.

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It happens that a taxpayer pays advance payments on income tax late during the year due to, for example, rent or income from work for a foreign employer. Interest is due for such delays, and if the taxpayer does not calculate them themselves, the tax office will do it for them. This can also affect the calculation of the amount of such compensation.