Towards the beginning of 2022, and those who work for at least two employers must perform tax coordination.

Why should tax coordination be carried out?

Tax liability is calculated on the basis of a citizen’s income, according to marginal tax rates and offsetting credit points according to the personal rights of that citizen (for this purpose, employers request to fill out form 101 at the beginning of each tax year again).

The calculation will be correct if an employee is employed at one workplace. But it will be wrong if the employee has several incomes from different sources that are not coordinated in terms of tax rates and credits.

for example:

An employee earns NIS 6,290 a month, which is NIS 75,480 a year at one workplace, and therefore the gross tax that will be owed according to the 10% marginal tax rate is NIS 7,548, offsetting a resident credit of 5,805 NIS, he will be liable for tax of NIS 1,743. The tax will be deducted through the slip. This tax payment method Called withholding tax, it is designed so that at the end of the year an employee will not have an income tax debt.

And in the second place, the same employee earns 2,690 NIS, which is 32,280 NIS per year, this amount is also obligated according to the lowest tax rates of only 10%. which comes out to NIS 3,228 gross. Since the employer without tax coordination does not know about the other employer, he will deduct from the obligation of 3,228 resident credit for the amount of 5,805 again, and will not charge the income of 32,280 NIS in tax at all.

The correct calculation that is carried out with the help of tax coordination is simply the consolidation of two incomes

75,480 NIS + 32,280 NIS = 107,760 NIS The gross tax charge will jump to 14% marginal tax

And the annual calculated gross tax will amount to 12,151 NIS after reducing the resident credit (one time only) Tax payable 6,346 NIS

Without tax coordination, an employee will pay much less tax (NIS 1,743 compared to NIS 6,346) and create income tax liabilities for himself.

In order to prevent this, the Income Tax instructed employers if an employee indicates that he works at 2 jobs to require tax coordination and if not to charge the second income at 47%. The gray area is created because not all employers ask about additional jobs.

When must the tax adjustment be made?

At the beginning of each year or immediately after starting the new job, this is to avoid lowering tax at a higher rate or creating tax debts as explained before.

Also, the tax coordination is valid for one tax year only. This means that those who performed a tax adjustment for 2021 will have to perform a renewed adjustment for 2022. However, the taxation authority allows the validity of the adjustment to be kept until February-March of the new tax year, in order to allow the employee to perform the renewed tax adjustment.

Who is responsible for tax coordination?

Employees working in more than one workplace – this includes 2 or more jobs, even if the income in each of them separately does not require paying tax.
In the meantime, even employees who changed their jobs during the tax year need to coordinate, since the tax is calculated per year and therefore it is possible that they will pay a larger amount due to a higher income in the previous job.
Retirees who receive a salary in addition to their pension.
Self-employed who have another source of income besides the income from their own business. This includes salary from working as an employee or any other taxable income.

How do you do tax coordination?

The process itself is very simple and there are several options for how to perform the operation (including a simple and digital option).

The most accessible option is through the Internet, with this method after a short registration, you can submit all the documents and receive the tax coordination. With this method, tax coordination can only be done once a year.

Another possibility is through the referral system of the Tax Authority website, the process there is quite similar in terms of necessary documents. The request is forwarded to the assessor and he determines the tax rate to be deducted for each of the jobs, the confirmation for this will be ready within 5 business days and will appear on the Tax Authority’s website.

A third option is to apply to the tax authority, this can be done by applying in writing to an assessor in the area of ​​residence. In such a case, form 116 must be filled out (also available online), if you do not fill out the above form, you will have to provide a number of important details (the employer’s name, the supplier’s deductions file – appears on the payslip, expected gross annual salary and number of months of work during the tax year). In addition, a recent pay slip from each of the workplaces must be attached (if there is no slip, it is necessary to give an explanation as to why the slip does not exist).

It is important to know and remember that since the tax is calculated annually, at the end of the tax year there is a recalculation of the tax and sometimes a corresponding refund for the entire last tax year if this is justified (for example if we did not submit the tax reconciliation on time).

If you forgot to do it or didn’t know it was necessary?

It is not possible to make a tax adjustment for a past year, for such situations you can request a tax refund. In this process, you submit forms and data regarding the salary and taxation you paid last year and the tax authority checks whether according to this data you are indeed entitled to a tax refund. If you know that you have not carried out the necessary processes throughout the year, hurry up and carry out the tax coordination now so that you will have a new reconciliation done before the end of the current tax year. If you don’t have enough, remember to ask for a tax refund.

Checking your eligibility is free of charge for the years 2016-2021.