Either vomit or get back…

In the year-end settlement last year, two out of three earned income earned an average of 580,000 won. On the other hand, 1 out of 5 people rather vomited more tax by an average of 840,000 won. That’s why the year-end settlement is called the ’13 month bonus’ or’additional tax bill’.

On the 15th, the National Tax Service started the year-end settlement simplification service through Hometax (www.hometax.go.kr). Although it varies from company to company, workers usually have to fill out the documents related to the year-end settlement from the end of this month to the beginning of the next month. This year, convenience has been improved by allowing access to Hometax with private certificates in addition to the existing public certificates. However, if you look at the contents, there are still a lot of confusing parts. Since this year, we have created a guide for all year-end settlement based on items that have changed from this year and items that are confused, and’Honey Tips’ that are useful to know.

The highlight of this year’s tax savings is credit card deduction. Benefits have increased significantly. Specifically, in March-July last year, the income deduction rate for credit/debit cards and cash was raised. Income deductions such as credit cards are calculated by multiplying the amount used over 25% of the total salary by the’deduction rate’. The existing deduction rate is 15% for credit cards, 30% for cash receipts and check cards, 30% for books, performances, museums, and art museums, and 40% for traditional markets and public transportation.

However, the amount used in March this year doubled the deduction rate. In particular, a deduction rate of 80% was applied for the amount used from April to July regardless of the payment method. The income deduction limit was also raised by 300,000 won. It is intended to increase consumption, which has shrunk in the aftermath of the novel coronavirus infection (Corona 19).

From this year-end settlement, the limit of deduction for pension savings accounts over 50 years old has been raised from 4 million won to 6 million won. If you add up to your retirement pension (IRP) account, you can deduct up to 9 million won. However, if the total salary is 120 million won and interest and dividend income is less than 20 million won. In addition, workers and spouses with a total salary of 70 million won or less can receive tax credit for medical expenses up to 2 million won when they use the postpartum care center. Salaries received during maternity leave have been changed to be tax-free.

Not all credit cards are deducted. Expenditures related to business, purchase of automobiles and gift certificates, health insurance, tuition, electricity, fees, gas fees, telephone charges, and various other charges and donations are excluded from the income deduction even if they are paid by credit card.

After credit cards, the item with the highest degree of deduction approval is medical expenses. Medical expenses can only be deducted when expenditures exceed 3% of total salary. Therefore, in the case of workers with a total salary of 50 million won, if the medical expenses are less than 1.5 million won (3%), there is no need to bring a receipt for medical expenses.

There are also contents that are confused as regulars. A representative example is’personal deduction’, the item that can receive the most income deduction. The personal deduction for dependents is deducted by 1.5 million won per spouse and dependents whose total annual income is 1 million won or less. However, dependents other than the spouse must meet the requirements of not only income but also under the age of 20 to over 60. If siblings and siblings register or report deductions for their dependents such as parents, they may be able to pay an additional tax after the year-end settlement.

There are also many income deduction benefits related to SMEs, but qualifications must be carefully weighed. Even if you work for a small and medium-sized business under the Basic Small and Medium Business Act, you are not eligible for exemption if you work in a professional service business such as a financial/insurance company, hospital, lawyer/patent attorney/lawyer/accountant office.

“Is this also an income deduction?” I have an item I want. The cost of purchasing school uniforms for middle and high school students and preschool children’s school expenses are typical. There are many cases of omission from the year-end settlement simplification service, so you need to bring a receipt. The same applies to the purchase of hearing aids, disability security equipment, and donations to religious organizations. The cost of purchasing glasses, which had to be collected until last year, can be found in the simplified service from this year. However, only when payment is made by credit card or cash receipt.

You can take as much as you know about education expenses. Special activity expenses (including book purchase expenses) paid to daycare centers and kindergartens are also subject to tax credit. Expenditures at academies or sports facilities that have been educated on a monthly basis, such as art academy or taekwondo hall, can also be deducted. However, since there are many cases that the simplified service cannot search, you need to bring a receipt and submit it. Field trip expenses, material expenses (paint, clay, etc.) and vehicle operation expenses are excluded.

Surprisingly, it is the’disabled person deduction’ that is not well understood. Under the Disability Welfare Act, it is often considered that only those with a welfare card are eligible. However, under the tax law, severely ill patients who need long-term treatment can also receive a disability deduction. If you have been treated for a long time because of cancer, dementia, stroke, and other intractable diseases, you can get a disability certificate from the hospital and receive a deduction for the disabled up to 2 million won per person.

If you are a dual-income couple, it is advantageous for the couple with the higher income to receive the deduction for dependents. On the contrary, it is advantageous for a spouse with a low income to receive deductions for medical expenses (over 3% of total wages) and credit cards (over 25% of total wages) under the condition of the minimum amount used.

Newspaper subscription fees starting this year are also eligible for income deduction during the year-end settlement in 2022. The deduction method is the same as the income deduction for current book and performance expenditures. Previously, the preferential deduction rate (30%) was applied to only the book purchase fee, performance fee, and admission fee for museums and art museums to deduct income. Starting this year, if an earned income earner with a total salary of 70 million won or less pays for a newspaper subscription with credit, debit, prepaid card or cash (receipt required), income deduction is available up to 30% of the subscription fee.

However,’newspapers’ that can receive income deduction benefits are newspapers defined in Article 2, No. 1 of the Act on Promotion of Newspapers, etc. The law categorizes newspapers as general daily newspapers, special daily newspapers, general weekly newspapers, and special weekly newspapers, and separates them from’internet newspapers’ and’portals’. This means that national and regional daily newspapers are included in the income deduction, and broadcasting, internet newspapers, and magazines are excluded from this income deduction. Rep. Choo Gyeong-ho, who initiated the amendment to the tax law, explained, “The newspaper has a strong public good nature, such as forming public opinion and providing a forum for discussion, so that it can receive income deductions.”

Sejong = Reporter Kihwan Kim [email protected]