More often than we would like to believe, from the salary of employees, excessive deductions of income tax are made. Many times the tax rate to be collected from employees’ wages is calculated without taking into account various factors that may affect it and ultimately a much higher amount is set than is actually payable. If, at the end of the year, it becomes clear after a final calculation that the employee has paid higher sums than he should have paid, he is entitled to receive tax refunds.
How is Income Tax for Employees Calculated?
The rate of tax for employee is calculated on the basis of his annual income. However, the income tax is deducted from the employee’s salary every month and the details of this deduction appear in the pay stub. This deduction specified in the pay stub is called “withholding tax”. In fact, it is only a calculation of the tax rate that is made by speculating what the employee’s annual income will be. At the end of the year, there are likely to be some gaps between the estimated and actual income. In these exact cases, the employee may be entitled to refunds.
When will an employee be eligible for tax refunds?
As mentioned, an employee will receive tax refunds when the originally levied tax is higher than the actual income. This can happen in different cases:
- Absence from work on which no payments were received like unemployment compensation, part-time jobs, unpaid time off, etc.
- Failure to perform tax coordination between different jobs.
- Incorrect filing of the various deduction and credit items such as marital status, living in a national priority area or a discharged soldier.
- Deposits to various funds.
- Many other variables.
How should a tax refund be applied for?
The tax refund application must be submitted at the end of the tax year and can be done up to 6 years from the end of that year. The office of the assessor must be contacted at the place of residence and submitted by several documents:
- Form 135 – Tax Return Request Form.
- Form 106 – An annual concentration of all salaries paid to the employee that year each month.
- Various documents for changes in marital status, place of residence, retirement provision and any other factor that will help with the tax deduction.
The refund will be made within one year from the date the assessment was made or two years after the tax was collected, whichever is later. The refund will be deposited directly into the employee’s bank account plus interest and linkage. The process of completing the forms, knowing all the deduction items that may be credited to us, and finding all the statements can be quite complicated processes. In order to ensure that our right to reimbursements is optimized and that the application is submitted in the most correct way without unnecessary headaches, we strongly recommend using the services of an accountant in the process.
Tax refunds in the hundreds to thousands of shekels accompanied by the accounting firm of Guy Dovrat
Guy’s in-depth knowledge of the tax authorities and the various procedures for deductions and credits before the Israeli tax authorities allow him to provide you with high-level tax consulting services. In order to enjoy a professional service that can save you thousands of shekels in a year, we invite you to hire our office located in Yehud and make the most of your salary.