Taxpayers can recover excess Personal Income Tax (IRPF) withholdings through two methods

Occasionally, individuals may notice that their payers have applied Personal Income Tax (IRPF) withholdings higher than those they are legally entitled to. This situation creates an excess of withholdings that the taxpayer has the right to regularize to avoid financial loss.

What the DGT has ruled

The Dirección General de Tributos (DGT) has clarified that there are two distinct procedures to correct this situation, depending on the stage of the tax process:

• Rectification of self-assessments: The taxpayer can request the rectification of the self-assessments submitted by the payer. This procedure is viable as long as said withholdings have not already been deducted in a personal self-assessment or through a data communication.
• Deduction from the tax liability: The second method consists of reducing the total net tax liability for the corresponding fiscal year, applying the withholdings that were actually incurred at the time of filing the IRPF return.

What it means for you

If you identify that the withholdings made by your employer or payer are excessive, you do not have to accept that balance in favor of the Administration definitively. The regulations allow the excess to be reimbursed or effectively offset. It is fundamental to distinguish whether the error should be corrected on the payer's declaration or if it can be applied directly to your own income tax return to reduce the amount payable or increase the refund.

What is advisable to do

Upon detecting an excess in withholdings, it is necessary to first verify whether those amounts have already been included in your income tax return. If they have already been deducted, the route of rectifying the payer's self-assessments would not be applicable to avoid a double deduction. Instead, you must ensure that the reduction of the tax liability in your annual return faithfully reflects the withholdings incurred. Given the complexity of rectification procedures and the interaction between the payer's and the taxpayer's declarations, it is necessary to assess each situation individually to determine the most appropriate mechanism.