Withholding taxes are low this month and will generate fewer IRS refunds.

State employees will begin receiving their January paychecks this Friday, with the net amount reflecting pay increases and a decrease in IRS tax withholding that will dictate future reimbursement reductions.

An employee (single and without children) with a gross salary of 1000 euros starts from this month withholding 89 euros to the IRS (compared to the 112 euros per month he deducted in the first half of 2023 and the 96 euros withheld monthly during the second semester), which means that during the year you will withhold taxes totaling 1246 euros.

The cost exceeds the amount of tax you will have to pay, which according to consultant Ilya’s calculations is 1004 euros, meaning you should receive a refund of 241 euros.

These values ​​only take into account the €250 deduction for general family expenses, not including other types of expenses that can also be deducted from the IRS, such as education, health care and others.

On a salary of €1,400, the tax withheld for that year would be €177 per month (2,478 per year), but the tax due would be around €2,367, which would mean the refund would be around €111 in this case. For a salary of €2,000, the refund (determined by the difference between withholdings and tax due) should be €190.

In the set of simulations carried out by Ilya for Lusa, only with a monthly salary above 3000 per month should the reimbursement exceed 500 euros – a value lower than the average for reimbursements observed in recent years.

According to Luis Leon of Ilya, the reduction in refunds is a “positive” fact and reflects the fact that in 2024 a new withholding tax model will be applied (which tries to reflect the progressivity of the tax and the income groups that make up it). from the beginning of the year, and not just for one semester, as happened in 2023.

“Tax withholding is an advance of money to the government, it’s money that should be in people’s pockets, not on the government’s side,” says Ilya’s inspector and co-founder, noting that the tax actually owed by each taxpayer does not match this monthly rebate, but the one determined when filing the annual income tax return.

However, some tax experts interviewed by Lusa believe that many people are accustomed to using IRS refunds to cover some more costly expenses – such as insurance, for example – and that cutting them may seem strange.

This reduction should be felt as early as 2024, when taxpayers file their 2023 IRS returns, and will increase in 2025, when the IRS estimates the income that will be paid during the current year.

The withholding tax tables that began to apply to Social Security pensions earlier this month and which now continue to apply to dependent wages have been adjusted to take into account the update of income brackets (at 3%), the existence of a new minimum and tax cuts rates falling into the first five IRS categories.