Letters from the taxman to workers on severance pay: an economic blow, anxiety and uncertainty are growing among Italian families.
Here a new front of tension opens up for many Italian workers linked to severance pay (TFR). The Revenue Agency has in fact started sending letters on severance pay, with an important implication.
Probable tax audits which could translate into heavy economic burdens for those who have received sums from their severance pay fund. This caused great worry among workers.
In fact, some see these requests as a potential drain that could heavily impact their assets or savings accumulated for a long time.
The tax management of these sums has become more complex. The laws on severance pay in Italy provide taxation variables. The Revenue Agency has intensified controls: many workers fear having a letter delivered.
Severance pay letters: what to expect
A large audience of Italian workers, in particular public employees, could receive a communication from the Revenue Agency regarding the recalculation of taxes on severance pay (TFR). This notice is leading numerous workers to have to deal with a tax adjustment additional. The issue is delicate and involves complex fiscal aspects, linked to deferred taxation and withholding taxes applied with particular timing, which could require a review after years.
TFR, or severance pay, is an allowance that private sector workers accumulate during their working life, with the possibility of allocating it to their company or to a pension fund. The accumulated sum is then paid out at the end of the employment relationship. In the private sector, severance pay is subject to immediate taxation upon disbursement, and is calculated based on a withholding tax applied by the company or fund that manages the payment.
TFR letters problems – pexels – lagazzettadiviareggio.it
The tax adjustment on the TFS and the news
The central point of the topic is precisely the recalculation of taxes, which is not uncommon in the case of TFS. The End-of-Service Indemnity specifically concerns public employees, with different calculation and taxation methods. Since the initial taxation is carried out in a provisional form, the Revenue Agency can, after some time, recalculate the actual taxapplying the average rate of previous years. This recalculation takes into account the changes in the taxpayer’s income in the reference period, and could, consequently, generate an adjustment to be paid by the worker. In other words, many government employees may soon receive a notice requesting an additional payment to fill the gap between the withholding tax initially applied and the tax actually owed.
The Revenue Agency has specified that these recalculations will not entail interest or penalties. This measure was introduced to avoid burdening taxpayers with additional costs and to maintain a transparent and clarity-oriented tax policy. The need for a tax adjustment on the TFS derives from a basic problem: when a sum is received at the end of the employment relationship, the taxation is carried out considering tax information available at that time. However, the average rate from previous years can vary for various reasons, which affects the actual tax amount. The situation also varies based on the type of worker: public employees are subject to these deferred taxation dynamics more frequently than private sector employees, due to the different regime applied to the TFS. Furthermore, the choice to allocate the severance pay to a pension fund or to keep it with the company affects the timing and methods of calculating taxes.
