Why do I have underpaid tax and how can I avoid this?

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Always check that:

Changes that may affect your tax:

You have paid less interest than estimated

One important allowance is interest on loans that you pay during a year, typically for a mortgage. The interest on loans is tax-deductible. The Norwegian Tax Administration obtains information about the amount of interest from the tax return. If the interest rate falls significantly, so that you pay less interest than you expected at the start of the year, you will be entitled to a smaller tax deduction than originally shown on the tax deduction card. As a result you will have underpaid tax. The same is true if, in the same period, you have paid off a chunk of the loan, and consequently owe less interest.

Tips on how to avoid underpaid tax:

Check the interest rate and debt amount that the Norwegian Tax Administration bases its calculations on. If these appear to be wrong, amend your tax deduction card.

You can get a repayment schedule showing both instalments and interest from your bank.

Incorrect allocation of the mortgage

Are you co-habiting and/or married, with a joint debt for which you have opted to allocate the interest between you? When the Norwegian Tax Administration receives information from the bank, it may be that the debt is only reported for one of you, even though you share the debt between you. This will mean that the deduction for debt to which you are entitled will not be pre-completed on the tax return of whichever of you is not registered for the debt. One of you will then end up owing underpaid tax and the other will have paid too much tax.

Tips on how to avoid underpaid tax:

The allocation can be sorted out by amending next year's tax return. You can also check the debt information on the proposed tax deduction card (the tax notice) that arrives in December. You can change this during the year by amending the tax deduction card.

When you amend the tax deduction card, a new tax deduction card is automatically sent to your employer.

Your life situation has changed – Your child has left kindergarten or an after-school supervision scheme. You are no longer a single provider. You have become a pensioner, and so forth.

If there are changes in your life situation during the year that affect your right to a deduction and you do not notify these, you may owe underpaid tax. For example, you may start the year as a single provider, but no longer be one at the end of the year.

It might also be the case that your child leaves kindergarten or after-school day care, and your expenses ceases.

You may also have less far to travel to work than you did the year before, with the result that the start of the tax year is based on inaccurate journey information.

If the basis for receiving benefits from NAV, for example, changes, you also need to notify NAV.

All of this may mean a reduction in your entitlement to deductions, and consequently an underpayment of tax during the year.

Tips on how to avoid underpaid tax:

As soon as changes occur in your life situation, you must amend your tax deduction card

You have several employers, and more than one used table-based deduction 

From the 2018 income year onwards, the tax deduction card will contain more information than before. Most people will have between two and six different tax deductions in their tax deduction card. The tax deduction card will clearly state who should use the various tax deductions and what type of income they should be used for. The only consequence of the change is that it will become easier for employers and pension providers to choose the correct tax deduction for different types of income.

Table-based deductions

You must still always check that there are not two payers making deductions in accordance with a table for the same work period. You can check this on your payslip or via the payments you receive from NAV.
If this does happen, you may well end up with underpaid tax. You should amend your tax deduction card to a percentage card if you have several payers (such as a main employer, secondary employer, NAV and other pension providers).

The commonest way of deducting tax is by a table-based deduction. When deducting tax in this way, both income and allowances are included. But if you have several employers, only your main employer (the one who pays most salary) can use table-based deductions. Other employers must use percentage deductions. If more than one employer uses table-based deductions, you will have too little tax deducted.

This means that, over the year, you will not pay enough tax and will need to make up the underpaid tax. This also applies if you are an old age pensioner.

If NAV pays your main pension, but you have supplementary pensions from previous employers, table-based deductions can only be used for the NAV payments. Supplementary pensions must be paid using percentage deductions.

Tips on how to avoid underpaid tax:

Ensure that your employers, and also NAV, are using the correct section of the tax deduction card. Your main employer can use table-based deductions, while secondary employers must use percentage deductions. 

You have switched from being an employee to a pensioner

When you switch from being an employee to a pensioner, you need to make sure that expenses you had while working and that stop when you retire are not included in your tax return. These may include, for example, trade union fees and pension contributions from your employer. These are tax-deductible, but if you have not incurred such expenses after stopping work, they are not deductions that can be included.

If the Norwegian Tax Administration has based your tax deduction card on allowances you are no longer entitled to, this will lead to underpaid tax.

Tips on how to avoid underpaid tax:

You can change information about these deductible items by  amending the tax deduction card.

Your income is higher than stated in the percentage tax deduction card

This only applies if you have percentage deductions. Most employees have table-based deductions, which means that changes in income are essentially irrelevant in terms of underpayment or overpayment of tax.

Tips on how to avoid underpaid tax:

In the case of percentage deductions, you need to keep track of changes in income and allowances, and report them by  amending the tax deduction card.

The details in the tax return do not agree

If your bank has incorrectly reported your assets and liabilities to the Norwegian Tax Administration, your employer has incorrectly reported your income, the kindergarten has forgotten to submit details of your expenses and so forth, the basis for tax deduction will be incorrect. In that case, you may be taxed incorrectly and end up with underpaid tax. These details must be checked when you receive your tax return and amendments must be submitted by 30 April.

Tips on how to avoid underpaid tax:

Review the tax return item by item and check the details against the annual statements from your employer, bank, NAV, etc.

If you receive a corrected statement from one of the bodies that report your details to the Norwegian Tax Administration before the tax return arrives, it is important that you enter these corrections.

If you have underpaid tax, you should compare the tax deduction card details with the annual tax return. Check that the details agree and if anything does not match up.

 

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