The null balance in the IRS is one of three possible situations after the submission of the annual IRS return. Find out why.

Null balance issued. What does it means?

When consulting your IRS Declaration, you may come across the status “Null Balance Issued”. This is one of the possible results of the tax calculation, made by the Tax Authority’s calculation model.

If the net collection (tax effectively due) is equal to the amount of withholdings and/or payments on account, there is no IRS payable or receivable.

This means that, over the previous year (for example, in 2021), the State advanced a tax amount equal to or very close to the amount effectively due (calculated in 2022). From the reckoning, no one owes anyone.

There is no “Billing note/notification issued” issuance nor is there any “Refund issued”. There is a “Null Balance Issued”.

Other situations can lead to this null balance. You may be faced with a refund and then a zero balance for:

  • tax debts, whose IRS reimbursement will be used, in whole or in part, for the respective settlement;
  • other debts to private creditors, holders of enforceable titles and which, legally, allow the attachment of the reimbursement of the IRS. 

In the case of creditors with the so-called “executive title”, they can make arrangements with the Tax Authority, so that the IRS reimbursement of a given debtor is pledged for debt settlement, in whole or in part.  

If the debt amount is less than the amount of the IRS refund, the taxpayer will continue to receive the difference.

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But how do you get to zero balance? How to interpret the results?

The taxpayer may be confronted with the following results after submitting the annual income tax return (which refers to income received in the previous year):

  • having to pay IRS tax refund (the State has a credit balance with the taxpayer);
  • have IRS receivable (the taxpayer has a credit balance with the State);
  • not have IRS to pay or IRS to receive (the null balance).

This result is presented in the IRS Settlement Statement, the document where AT presents the values ​​and calculations made with its income and deductions.

Taking an example. In 2022, submit the IRS statement reporting the income earned in 2021.

In a simplified way, this income, as well as the specific deductions to which you are entitled (those applicable to each category of income, such as social security contributions, for example), deduct from your income.

Whether or not you are declaring joint income (joint taxation of the couple), and other factors, determine your taxable income . This, in turn, will determine your tax bracket.

This category results in an IRS rate that is applied to your taxable income. And, from this, a tax amount is due. In a very simple situation, there will be nothing more to consider, we arrive at the total tax collection .

However, the IRS code provides for the possibility of deducting charges / expenses from this tax. These are, roughly speaking, the ones you find every year on e-invoice. Expenditure on health, education, homes, real estate, family overheads, etc., etc. In addition to these, you also have other fixed deductions for dependents or ascendants of your household. 

In a simplified way, after deducting these charges – the so-called tax deductions – the AT system calculates the so-called net tax collection . This is the tax effectively owed to the State for the income received in the previous year.

But this is not “IRS receivable or payable” . How did we get there?

We continue with the example of delivering the IRS in 2022. Now, throughout 2021, the taxpayer “advances” money to the State on account of the tax. This is done through IRS withholdings , or payments on behalf of the IRS.

In the 1st case, a dependent worker “discounts monthly to the IRS” according to IRS withholding tables. In the 2nd case, a self-employed worker, for example, who does not make a withholding tax, can himself make payments on account of this tax.

In both cases, we speak of tax paid to the State. Strictly speaking, it is an amount advanced to the State, monthly, on account of a tax, the exact amount of which we only know in the following year.

The IRS withholding rates are intended to be an approximation to the effective tax rate that is determined in the following year. But it is not the same. After all, as we have seen, there are other factors that influence the amount of tax to be paid, such as deductions, the profile of the taxpayer and his household, for example.

However, if the taxpayer, throughout 2021, has advanced money to the State on a monthly basis, the tax is paid. But is it all paid? Did you pay more or less? Did you advance money more or less? 

The conclusion is drawn by comparing our net collection with withholding amounts and/or payments on account . It is like a “settling of accounts” with the State.

See your IRS Settlement Statement. See the values ​​of lines 22, 23, 24 and 25.

In a “null balance” situation, with no other situations as we saw at the beginning of this article, there is no amount to pay or receive. The net collection (tax effectively due) is equal to the amount of withholdings and/or payments on account.

If there is nothing else in lines 26, 27, 28 or 29, the tax calculated will be equal to zero.

When is there an IRS refund?

As the name implies, the State will reimburse you, will refund the tax you overpaid, when the amount of withholding/payments you made in the previous year is higher than the tax actually due.

In this case, the State will reimburse you for the amount you advanced “extra”, due to a tax due that, after all, is lower: net collection < withholding tax and/or payments on account.

On your settlement statement you will have “Amount to be refunded” (example above). At a certain point, on the Finance Portal, your Declaration will appear with “Reimbursement Issued”.

When is the IRS payable?

This is the reverse case. In other words, the advances made in the previous year were not sufficient to cover the tax assessed and effectively due. In this situation we have net collection > withholding and/or payments on account .

There will be an “Amount payable” on the last line.

We must pay the State “what is missing”. A “Notification Issued” will appear on your IRS Statement. Read, “will be notified” to pay the amount of tax you still owe the state.

Finally,  please note:

  • with the delivery of the IRS, the State determines its tax due on the income earned in the previous year;
  • with the calculation of the tax there is “a settling of accounts” with the State;
  • when the State “pays” you the IRS, in fact, it does not pay, it only returns the tax you overpaid, on account of this tax, in the previous year;
  • when he “pays IRS” to the State, he is paying the portion of tax “which remains to be paid”, in relation to the tax effectively owed to the State (what he advanced in the previous year was not enough).

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