Multiple places of employment at the same time
An individual who is employed in more than one work place must conduct tax coordination. This process is done in order to determine the minimum tax rate for withholding tax based on all places of employment. It’s important to know that even when tax coordination is done properly, that doesn’t guarantee that there won’t be a discrepancy since at the time the tax coordination is done, income is increased by about 10% automatically. In addition, the actual amounts don’t always match the amounts which were reported.
For example, David works in two places of employment.
In his “main” job, he earns ₪15,000 per month.
In his “secondary” job, he earns ₪4,500 per month.
In this example, the marginal tax rate for David’s first and primary workplace stands at 31%. Therefore, when he receives his confirmation of tax coordination from the Israel Tax Authority for his second workplace, the confirmation will specify that the secondary workplace should withhold tax from the very first shekel at the rate of 31%.
To continue from the previous example, if the David earns only ₪12,000 per month, his marginal tax bracket will only be 20%, and the withholding from his secondary workplace will not be correct. Since the ₪4,500 he earns per month at this second job will have been taxed at 31% from the first shekel rather than at the marginal rate of 20%, this causes a situation where David is entitled to a tax refund. To receive his refund, all David has to do is file a tax return for the applicable year(s).
When obtaining the confirmation, the salary details are entered according to the expected salary or according to the employee’s estimate at the time of performing the tax coordination. It is often possible for the salary details used for the purpose of tax coordination are different from what is actually earned (as in the case of hourly or daily employment), and this creates discrepancies which can entitle the individual to a tax refund.
However, it is important to note that sometimes, these tax discrepancies will favor the employee, and in this situation, it could create a tax obligation (tax which must be paid). Therefore, it’s very important to investigate before you submit a request for a tax refund, and not submit the request until this is done. It’s advisable to work with a company which will perform the required investigations to make sure that you’re not accidentally creating a tax obligation.
When you work with our firm, we place a special emphasis on these issues and never submit a request for a tax refund before running a comprehensive simulation to find out exactly what you’re owed.