What is deduction code 501: features of reflection in certificate 2 – personal income tax

What does deduction code 501 mean?

For the performance of labor duties, the employee receives a salary and other types of remuneration (bonuses, vacation pay, temporary disability benefits, etc.), from which the employer, acting as a tax agent, is obliged to pay income tax in the amount of 13% to the consolidated budget.

But not all income is subject to personal income tax, but for some, only if it exceeds a certain amount. This right of citizens is recorded in reporting forms in the form of a tax deduction.

The classifier of grounds for income tax refunds was approved by Order of the Federal Tax Service No. [email protected] dated September 10, 2015 (Appendix No. 2). In accordance with the regulatory act, deduction code 501 is used in situations where an employee, including a former employee, was given a prize or gift, the value of which was more than 4 thousand rubles. What does it mean?

This indicates that this type of remuneration relates to partially taxable income. That is, if the price of the prize does not exceed the specified limit, then the gift in value terms is not subject to personal income tax, and therefore, it should not be indicated in the reporting forms.

In situations where the amount of remuneration is above 4 thousand rubles, a benefit is applied that reduces the tax base by this amount. That is, if Semenov L.P. they gave a tea set for their anniversary, the price of which was 5,000 rubles, in certificate 2 of the personal income tax it is required to reflect this type of income, applying to it a benefit in the amount of 4,000 rubles. As a result, the tax will be calculated on the remaining amount - 1000 rubles.

A number of requirements should be highlighted to grant the privilege:

1. A citizen must receive official income.
2. An individual entrepreneur operating under the simplified tax system and other taxation systems that do not require the deduction of personal income tax cannot register.
3. The amount cannot exceed 4,000 per year. That is, this benefit does not apply to each gift, with a reduction in the tax base by the specified amount.

We recommend additional reading: Certificate of income 2 personal income tax, what this is and a sample for filling out
But there are cases when tax agents do not fulfill, for one reason or another, their duties to transfer funds to the state treasury from the income of their subordinates. In such situations, citizens must independently submit a tax return with accompanying documents to the Federal Tax Service in order to report on all types of remuneration provided.

As part of Form 3 of Personal Income Tax, the citizen will need to fill out Appendix 4, line 020, which records the value of prizes and gifts given by the landlord.

Features of tax deductions

Only an officially employed person who is a resident can apply for a tax benefit. He must receive a salary and pay tax on it in the amount of 13%.

Tax and deductions

A tax deduction is an amount that reduces total income, forming the final tax base. Sometimes this concept refers to the return of part of previously paid tax. For example, when purchasing residential real estate, training or treatment. In this case, you can not return the entire amount, but only the money that was paid to the budget.

The employer annually generates a special form of certificate for all employees and sends it as a general report to the inspectorate. In addition, the employee himself may need it; the accountant is obliged, upon the employee’s application, to issue it within three days. When dismissing a person, the employer must also issue this document along with the work book.

The title of the certificate determines its content. It contains information for the year on a monthly basis.

Main deduction codes

All types of deductions are divided into several groups, depending on the basis for providing the benefit:

• standard;
• social;
• property;
• professional;
• investment.

Each group includes several types of privileges, which are designated by a specific code:

Separately, there are types of income of individuals that are not subject to taxation or are not subject to personal income tax within the limits established by law:

• 502 – deduction for prizes in cash equivalent for participation in competitions and contests;
• 503 – benefit when an employee receives financial assistance;
• 505 – the amount of reduction in the tax base for winnings or prizes received as a result of advertising;
• 508 – benefit for one-time financial assistance from the employer for the birth of an employee’s child.

Deductions can be provided for the taxpayer himself and his family members, in accordance with the law.

Where to indicate social deduction with code 327 in the 3-NDFL declaration

You submit a 3-NDFL declaration if you want to receive a social deduction from the tax office. Then fill out deduction code 327 in the 2020 3-NDFL declaration in the following order.

Take the tax return form 3-NDFL, which was approved by order of the Federal Tax Service dated December 24, 2014 No. ММВ-7-11 / [email protected] (as amended on October 25, 2017). Fill in it:

• title page;
• sections 1 and 2. They are completed by all individuals;
• sheet A. On it, write down all income (main at the main place of work and all additional ones), as well as personal income tax calculated and withheld by the employer;
• sheet E1. On it you will indicate the social deduction with code 327.

Let's look at sheet E1 in more detail. Here you will indicate standard and social deductions.

If you have a child, you receive a standard personal income tax deduction for up to the month in which the amount of income exceeds 350,000 rubles. (subparagraph 3, paragraph 1, article 218 of the Tax Code). Indicate such a benefit in lines 030 – 060 of sheet E1.

For social deductions, the Federal Tax Service has allocated lines 080 – 180 on sheet E1. You will write deductions with code 327 in lines 150 or 160 of sheet E1.

If you paid insurance premiums under voluntary personal insurance contracts, as well as under voluntary insurance contracts for your spouse, parents or children (wards under the age of 18), write down the amount in line 140.

If you transferred pension and insurance contributions under contracts of non-state pension provision, voluntary pension insurance and voluntary life insurance, as well as additional contributions to a funded pension, fill out line 150.

Example: How to reflect social deduction with code 327 in the 3-NDFL declaration

A.I. Ivanov paid contributions under a voluntary personal insurance agreement in the amount of 15,000 rubles. There were no other standard and social deductions in 2020. We will show how Ivanov will reflect the amount of the benefit in the 3-NDFL declaration.

See below for a fragment of the 3-NDFL declaration.

Deduction by code 327 in 3-NDFL

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How to correctly fill out the 501 code in personal income tax certificate 2

Since 2020, two forms of personal income tax certificate 2 have been introduced, for individuals and the Federal Tax Service. Accordingly, the filling will be different.

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An income certificate for an employee includes five sections. In 3 and 4 there are fields for entering deduction amounts. The difference is that block 4 is intended to reflect property, social or standard benefits. Deduction 501 refers to types of profit paid by the landlord and is reflected in certificate 2 of the personal income tax in section 3.

The income code for gifts given to employees, according to the classifier, is 2720. It is required to be indicated in reporting only if the legal limit of 4,000 rubles is exceeded. That is, the reward code and the value of the gift are indicated in the appropriate fields, and deduction code 501 and the tax-free amount are recorded next to it. As a result, the general base for calculating personal income tax will be reflected in the reporting results, minus the benefits provided.

When generating reports for the tax service, deduction code 501 must be reflected twice:

1. In the certificate form - in the third section, which reflects all types of benefits provided to the taxpayer.
2. In the appendix to the reporting, where all types of income and deductions received by an individual are deciphered.

For different types of income

Let's talk about income codes first. New codes used when preparing documents were developed and approved by the Federal Tax Service not so long ago - in 2020. This is evidenced by Order No. ММВ-7-11/387. These codes are placed in the third section opposite the individual income. The codes used below are especially common.

Thus, the code number 2000 is used to indicate the remuneration that was paid to the employee for performing his job duties. That is, in order to indicate your salary in the 2-NDFL certificate, you should enter code 2000.

Moreover, this code is used for salary, which was paid in cash equivalent. The same code is used when you need to designate a bonus.

But if the salary comes in kind, then it should be designated with code 2530.

If we are talking about payments made under civil contracts, then the code number 2010 is used. A deduction in the amount of expenses that have documentary evidence can be applied to this type of payment. In this case, the code 403 will be displayed.

In the case of vacation pay, code 2012 will be used. We are talking about vacation, which is provided and paid to the employee on a daily basis, which is prescribed in Article 114. If we are talking about vacation compensation, which is paid during dismissal, then the code is not 2012, but 2013.

There is also a code for dividends. It has the number 1010. If we are talking about payment for goods and services, then code 2510 is put on the certificate. This may also include items such as rest, food or payment for utilities.

Example

Let's look at an example of how to reflect deduction code 501 in a certificate:

Let’s say that P.P. Semenov received a salary of 24,101.07 rubles in December 2020. and was given a New Year's gift, the cost of which was 6,000 rubles. Firstly, these types of income must be entered into the reporting form under different codes: 2000 and 2720, respectively.

Due to the fact that the size of the gift exceeds 4 thousand rubles, it must be included in the document, and in the “deduction code” field, enter the required benefit “501” indicating the limit established by law. Personal income tax will be calculated from the remaining amount - 2000 rubles.

When calculating the tax base, it is necessary to subtract the deductions provided for the year from the total amount of income, including under code 501.

Sample declaration to fill out:

In line 020 it is necessary to indicate not the entire cost of the gift, as in the certificate, but the amount not subject to taxation, that is, 4 tr. When filling out the form, it is recommended to use a certificate of income of individuals, which reflects all accruals and deductions of the employee.

Approved Revenue Codes

For convenience and uniform reflection of income in accounting and tax accounting, certain codes are used. In certificate 2 - personal income tax, separate cells indicate codes by which you can determine the name of the earnings received. The classifier approved by law includes codes consisting of four digits. All income is distributed by codes from 1010 to 4800.

Income classification

Quite often, when assigning a code, an accountant may doubt the correctness of the chosen cipher. Then they assign it to code 4800. There are no penalties in the law for incorrectly assigning income in certificate 2 - personal income tax. However, this does not mean that codes do not need to be given attention. Different types of income have their own individual code. Incorrect classification may lead to a distortion of the tax base. Accordingly, the tax will be calculated incorrectly.

There are several basic income codes that are used by employers:

• 2000 – salary
• 2012 – vacation pay
• 2300 – disability benefits
• 2400 – rental profit
• 2760 – financial assistance from the enterprise
• 2720 ​​– gifts
• 2730 – prizes
• 4800 – other income

If the directory does not contain the required code for attributing income, it should be designated as code 4800.

It is important to correctly attribute income according to the codes; this will help not to distort the tax base, but accordingly correctly calculate the tax. Nowadays, almost all accounting departments are automated, so problems with incorrect assignments are rare.