Tax withheld on account: what it is and why discrepancies can emerge during tax checks

Tax withholding on account is one of the most common mechanisms through which the State collects IRPEF income tax in advance. The principle is simple: whoever pays certain fees withholds part of the amount due to the recipient and remits it to the Treasury on their behalf. The taxpayer therefore does not receive the full gross fee; part is already treated as an advance payment towards the tax to be determined in the tax return. The system becomes more complex, however, when the Italian Revenue Agency later compares the taxpayer's declared figures with information supplied by the withholding agent, the Certificazione Unica income certificate and payments made through Form F24. These checks are where potentially significant discrepancies emerge. Understanding their origins requires following the entire path of the withholding, from payment of the fee through to the tax return.

What is tax withheld on account?

Imagine a resident professional receiving a fee of 1,000 euros from a business subject to withholding-agent obligations. In the ordinary case under Article 25 of Presidential Decree 600/1973, withholding on account is 20%. This example disregards VAT and other invoice components to isolate the mechanism. The withholding is neither a discount granted to the client nor an additional cost for them: it is part of the fee remitted to the Treasury on the professional's behalf.

Why is it called “on account”?

The crucial phrase is on account. The amount withheld is not necessarily the final tax due on that income. It pays part of it in advance. Suppose a professional has a total of 6,000 euros withheld during the year. When the return is prepared, the actual tax due on total income is calculated. If IRPEF due were 8,000 euros, the amounts already withheld would be credited against it, leaving 2,000 euros payable. If the final tax were instead 5,000 euros, the 6,000 euros already withheld could, absent other factors, result in a credit of 1,000 euros. The mechanism can be summarised as:

Amounts withheld are therefore advance payments made during the year, not necessarily the final tax.

Who is the withholding agent?

The party making the withholding is called the withholding agent. Its role is to deduct the amount at payment, remit it to the Treasury and subsequently report and certify the information required by law. In the ordinary relationship between a professional and a company, there are therefore at least three parties: the professional receiving the income, the client company making the deduction, and the Treasury receiving the payment. This matters because the taxpayer may have properly suffered withholding from their fee even if the agent subsequently makes a certification or reporting error. Such situations can give rise to challenges or requests for clarification.

The withholding process

To understand tax checks, it helps to follow the complete cycle. The agent pays the fee, applies withholding, remits it through Form F24, certifies the income and amounts withheld to the recipient through the Certificazione Unica, and reports the information to the Revenue Agency through the required filings. The recipient uses the certified withholding to reduce the tax due on their own return. The Revenue Agency therefore has data from multiple sources and can compare them. These comparisons reveal many of the discrepancies challenged.

The Certificazione Unica

The Certificazione Unica, or CU, is a central document in the system. It records the income paid by the withholding agent and the amounts withheld. The pre-filled tax return also uses CU information to populate income and withholding where available. The Revenue Agency expressly states that the section on advance payments and withholding allows users to consult CU data and payments made through F24. The CU is therefore fundamental, but should not be regarded as the only possible evidence that withholding occurred.

Why discrepancies can arise

Imagine a taxpayer declares 10,000 euros of tax withheld, while the tax registry shows only 8,000 euros. For the Agency, there is a difference of:

This discrepancy may have many causes. The agent may have completed the CU incorrectly, omitted a certificate or attributed the withholding to the wrong year; alternatively, the taxpayer may have entered an incorrect amount in the return. The tax check aims to establish which figure is correct.

The formal review under Article 36-ter

One of the most important procedures is the formal review governed by Article 36-ter of Presidential Decree 600/1973. Through this review, the Agency checks whether return data match the taxpayer's retained documentation and information from returns filed by others or supplied by external bodies. If inconsistencies emerge, the taxpayer may be asked to submit documents and explanations. The formal review also allows the Agency to disallow all or part of the credit for tax withheld on account where it is not adequately substantiated. This is precisely why withholding discrepancies can trigger Agency notices. Suppose a professional reports 12,000 euros withheld, while certificates in the Agency's systems show 10,500. The Agency may ask for evidence of the 1,500-euro difference.

The taxpayer will need to reconstruct their dealings with the withholding agents and provide the available documents. If they can show that withholding actually occurred, the position can be corrected. If suitable evidence is unavailable, however, the Agency may disallow the credit in whole or in part.

The problem is not necessarily the F24

Two matters must be carefully distinguished here. The taxpayer suffers withholding when the agent deducts part of their fee. Subsequent payment to the Treasury is the agent's obligation. Reconstructing a discrepancy therefore requires more than asking whether the F24 was paid correctly. The entire relationship must be reconstructed: invoice, net payment, certificate, any correspondence and accounting documentation. An error in the agent's payment does not automatically constitute an error by the recipient. However, the actual entitlement to credit the withholding must be demonstrated under the applicable rules. The total withholding shown in CUs may not immediately match the sum of selected F24 payments viewed without an analytical reconstruction. This is because an F24 may include several payments relating to multiple recipients and different types of withholding, while a CU certifies the share attributable to the particular taxpayer. The correct comparison therefore does not always involve taking one CU and looking for an F24 of precisely the same amount. The data must be reconciled within the withholding agent's accounts.

The year can cause errors

Another frequent source of discrepancies is the correct period. Suppose an invoice is issued in December but paid in January. Under the applicable rules, withholding is normally linked to payment and may therefore fall in the year after the invoice date. Looking only at the document's date may attribute it to the wrong year. The same issue can arise with corrected CUs or amended returns. Many tax reconciliations therefore require a clear distinction between the invoice year, payment year, withholding year, CU year and year of the return in which the credit is claimed. If an agent discovers that incorrect data were submitted, corrections or replacements may be made in the cases and within the deadlines provided by law. The document initially received by the taxpayer may therefore differ from information subsequently present in the Agency's systems.

When a discrepancy arises, it is useful to check for subsequent or corrected certificates. Not all discrepancies originate with the agent. Imagine a taxpayer with four CUs showing withholding of 2,500, 3,200, 1,800 and 2,100 euros respectively. The correct total is 9,600 euros. If 10,600 euros is mistakenly entered in the return, the Agency will identify a 1,000-euro discrepancy. Such errors are particularly easy when many certificates are involved or some withholding is entered manually. Another possibility is using the same certificate twice. For example, a CU may already be included in the pre-filled return, and the taxpayer may inadvertently add it manually again. The income or withholding would then be duplicated. Before adding to pre-filled data, it is therefore always useful to check which information the Agency has already used.

Form 770

On the withholding agent's side, its own return is also relevant, traditionally Form 770 for the information reported in it. This is one of the tools through which the tax authorities obtain information on withholding and payments made by the agent. Reconstructing a tax discrepancy can therefore involve four levels: the CU, showing what was certified to the recipient; the F24, documenting what was remitted; the 770, reporting what the agent declared; and the taxpayer's return, showing what was claimed as a credit. Reconciliation aims to ensure these figures tell the same story.

A reconciliation example

Suppose an agent paid a professional fees subject to withholding of 50,000 euros during the year. The theoretical withholding is:

The CU shows 10,000 euros and the professional declares 10,000 euros. The agent's tax documentation, however, reveals that payments used an incorrect total or that some were assigned to the wrong period. From the professional's perspective, withholding may still actually have occurred, but the transaction must be properly substantiated. Reconstruction must begin with the actual documents, not merely the observation that “the F24 total does not match”.

Which documents may help?

In a withholding dispute, relevant documents may include the CU, invoices, bank statements, transfer receipts, the agent's documentation, any corrected CUs, tax returns and electronic filing receipts. Suppose a gross invoice is 1,000 euros and the bank transfer received is 800 euros, consistent with withholding of 200 euros. This evidence can help demonstrate that the taxpayer actually suffered the deduction.

A formal review is not yet a tax collection notice

When the Agency sends a notice following a formal review, this does not automatically mean its claim is final. Notices following automated or formal checks communicate the review's outcome and allow the taxpayer to provide explanations or regularise the position. This matters because, when faced with a withholding discrepancy, the first step should be to reconstruct the figure from documentary evidence before concluding that the amount requested is necessarily due. Discrepancies become particularly common when taxpayers have worked for many clients. Suppose a professional received fees from fifteen different companies. There may be fifteen certificates, fifteen sets of payments and fifteen agents that complied in slightly different ways. If even one CU showing 1,500 euros withheld is missing, the return may contain a significant discrepancy. Before filing, it can therefore help to prepare a simple schedule:

Client C's missing CU is immediately apparent.

Withholding and the flat-rate tax regime

Not all professionals ordinarily receive fees subject to withholding. Taxpayers operating under the Italian flat-rate tax regime (regime forfettario), where the statutory conditions are met, are generally not subject to withholding on account on revenue or fees from activities covered by that regime. The mechanism described is therefore particularly relevant to professionals under the ordinary regime and all other situations in which the law requires tax to be withheld at source. Another common mistake is assuming that 20% withholding means the professional is ultimately taxed at 20%. It does not. Withholding is a payment on account. Final tax depends on total income, IRPEF tax bands, deductions, tax credits and other elements of the return. The 20% is therefore the withholding percentage, not necessarily the final tax rate on the income.

Discrepancies must be reconstructed year by year

When a challenge concerns several years, it is particularly important not to add everything together immediately. Suppose the Agency challenges discrepancies of 1,000 euros in 2022, 2,500 in 2023 and 700 in 2024. For each period, it is necessary to reconstruct separately the income received, CUs issued, withholding shown, amounts declared and any subsequent corrections. A discrepancy in 2022 may have an entirely different cause from one in 2024. Chronological reconstruction avoids mentally offsetting errors that belong to distinct tax periods.

A practical checking method

Before filing a return or when an Agency request arrives, an effective check can be performed in four steps. First, add up all withholding shown on CUs for the correct period. Then compare the total with the return. For any differences, trace them to the individual agent and finally verify payments, corrected CUs and available documentation. Only afterwards does it make sense to analyse the agent's F24s and returns where needed to understand the anomaly. This avoids becoming lost immediately in hundreds of payments before identifying which relationship gives rise to the difference.

Conclusion

Withholding on account is simple in principle but complex in its documentation: the agent deducts part of a fee, remits it to the Treasury and certifies it; the taxpayer then uses that amount as an advance payment of tax due. Discrepancies arise when one step does not match the others. A CU may be incorrect or missing, withholding may be attributed to the wrong year, the taxpayer may duplicate an amount, or the agent's declared figures may not immediately align with those used by the recipient. Faced with a challenge, the right question is therefore not “The Agency says 2,000 euros is missing, so who made a mistake?”, but “What was actually withheld, how was it certified, in which year should it be credited, and which document explains the difference?” This reconciliation can often provide a precise explanation for an apparently inexplicable discrepancy.

Note: the specific treatment of withholding depends on the type of income, the recipient's tax regime and the available documentation. A formal review or significant discrepancies require a detailed reconstruction of each tax period and each withholding agent.