How to declare income correctly in the 2023 Income Tax

In this week, the Brazil Agency separated some of the main doubts about the subject. The questions were selected through interviews with the population and were answered by Professor of Accounting Sciences Deyspson Carvalho, from the University Center of the Federal District.

The material is part of a guide published by the vehicles of Brazil Communications Company with some of the main guidelines for declaring to the Tax Authorities.

To listen to the complete responses in audio, click on the players. To listen to last week’s theme, published in Agência Brasil, click here. You can also follow the complete series on National Radio Agency by clicking here.

Click and check out the IR 2023 FAQ series

What do I need to declare to not fall into the fine mesh?

According to the professor, the omission of earnings from the Income Tax declaration is one of the main reasons for retentions in the fiscal mesh, better known as fine mesh. “This often happens with income eventually received, for a temporary job or a service provided occasionally”, says Deypson Carvalho.

If the person falls under one of the rules that oblige him to declare the Income Tax (see details here), it needs to declare earnings received from Legal Entities (such as, for example, wages and labor benefits), pensions, retirements, investments, amounts received from abroad and even some amounts received from individuals.

The professor warns that earnings obtained by dependents in the Income Tax must also be declared. “Often, children, even minors, do temporary jobs and receive remuneration. All remuneration received by the dependent must also be declared”, he adds.

Is it necessary to declare earnings on the stock exchange? Is there an exemption this year for any amount?

One of the most complex types of earnings to declare in the Income Tax is income from investments. While earnings from savings and some types of fixed income (such as the Real Estate Credit Letter) are exempt and must be declared as such, there are gains subject to tax collection.

One of the main changes in the 2023 IRPF is related to the declaration of some of these gains, more precisely on the Stock Exchange. The change has raised doubts in some people.

One of them is Patrícia Kawamoto. She made investments in 2022 and have questions about how to make the statement. “I would like to know how and what I should declare on IR2023”, she asks her. Another contributor with doubts is James Franco. “I know there is a limit to declaring earnings on stocks. What would that limit be?

In fact, not everyone who invested in stocks needs to declare income tax. Taxpayers who purchased shares or other assets traded on the stock exchange and did not sell anything in 2022, or, if sold, did not exceed R$40,000 in the annual sum, or even had exemption for all months of 2022. “Hence the importance and need for the taxpayer to know all the mandatory criteria before knowing whether or not he will need to declare his actions in the annual income tax”, explains Deypson Carvalho.

For those who need to declare, the professor points out that it is important to rely on consolidated documents so as not to make mistakes in the values. “The taxpayer should base himself on the information contained in the brokerage notes of the investments in shares made in 2022, documents of revenue collections during the year, the income reports of the companies in which he invested, the bank statements containing the movements and also use as support to help with the personal control of operations”, he says.

Assets in custody on 12/31/2022 must be informed in the Assets and Rights form (code 03 – equity interests) at the cost of acquisition. Dividends received from shares must be entered in the Exempt and Non-Taxable Income form.

In the case of the sale of shares, the field depends on the value. If the amount is less than R$ 20,000, it must be recorded as Exempt and Non-Taxable Income. If the amount is greater than R$20,000, the variable earnings calculation statement must be completed.

In relation to Interest on Own Capital, it must be registered in the Income subject to Exclusive Taxation form, if it was received in 2022. If the taxpayer has not yet received it, it must be entered in the Assets and Rights form as “distributable value”.

Do those who work in their spare time with apps need to declare earnings?

Many people are carrying out, as a main or secondary activity, a job as a driver through digital platforms, the so-called mobility applications. Reader Alex Ramaldes has doubts about how to declare earnings. “When it comes to declaring, as I work in my spare time with an application, am I obliged to declare this to the Tax Authorities?”, he asks.

The answer is yes. If the person is obliged to declare the Income Tax and received the amounts as an Individual, he needs to account for the earnings as an app driver.

The use of carne-leão helps when declaring these gains. On a monthly basis, the taxpayer can declare earnings from mobility applications in the carnet-leão so that, when declaring, this data can be exported to the Income Tax program, which will make the adjustment and verify whether the taxpayer has tax to pay or refund .

The UDF professor even warns that failure to declare can lead to problems for the taxpayer: “The Federal Revenue receives in advance the information provided by paying sources and information on payments made by individual taxpayers to other individuals. Therefore, those who receive extra income, whatever the source, must inform it in their annual adjustment declaration, under penalty of the declaration being retained in the tax net”.

Is it necessary to declare the sale of used products?

Ok, earnings from work activities must be declared. But what about that money we sometimes earn for selling a used product (like a television or refrigerator)? Does that even need to be declared?

Professor Deypson Carvalho explains that the mandatory declaration depends on some factors. One is the frequency of activity. If the sale is carried out eventually, the profit earned on the sale is taxed as a capital gain of the individual. If the activity is carried out on a regular basis, the individual is considered a sole proprietorship equivalent to a legal entity, and its profit is taxed under this condition.

“Usually, vehicles and home appliances are sold for less than the acquisition cost, thus not generating taxable capital gains, which rarely happens with real estate,” he says. That is: if there is no profit, there is no tax to pay.

Finally, there is the issue of asset value. “If the sale of goods of small value exceeds R$35,000.00, the capital gain must be determined and the tax paid in accordance with current legislation”, completes the professor.

How to declare earnings with retirement, social security and pensions?

A frequent question for taxpayers is in relation to the declaration of retirement, social security and pensions. These earnings are considered, up to the monthly amount of R$1,903.98, as exempt for those over 65 years old. With this, earnings up to this amount must be computed in the Exempt and Non-Taxable Income tab of the declaration program.

“The declaration program will automatically check the annual exemption limit and the 13th salary and will inform the taxpayer if it exceeds the exemption amount allowed by law”, says Deypson Carvalho.

For those who end up exercising a second activity, it is important to be aware. This is because although each paying source applies the monthly exemption, it will be necessary to make the payment adjustment at the time of the Annual Income Tax Declaration. “If the calculation is not accepted by the taxpayer, the statement will be prevented from being delivered to the Federal Revenue”, warns the professor.

How to declare child support earnings?

Judicial alimony from the point of view of those who receive it is now considered, after a 2022 decision by the Federal Supreme Court, as income exempt from Income Tax taxation. With that, there were changes in the income tax declaration. For 2023, the declaration program was adapted so that this type of income is informed by the beneficiary taxpayer in the Exempt and Non-Taxable Income form.

It is only necessary to make the declaration of earnings with child support for people who are, for some reason, obliged to make a declaration of Income Tax 2023.

To read and listen to all the articles in the IR 2023 Tira-Dúvidas series, access the special page.