Tax refunds for high-tech workers

High-tech workers often enjoy good working conditions and high salaries, stocks and options, are active in the stock market, pursue professional studies and more…

If you are a high-tech worker you may be surprised to realize that it’s worth looking into your eligibility for a tax refund. The tax authority may have a pleasant surprise waiting for you.

High-tech workers are entitled to the same income tax rights and obligations as any other sector of the economy. Tax refunds aren’t the exclusive domain of high-tech workers – every taxpayer in ever sector is eligible for tax refunds according to the method of calculation performed in Israel. But despite this, due to changes in income level, change in place of employment and high salary, you should realize that high-tech workers have a good chance of receiving a tax refund by filing a tax return for the applicable year(s).

In addition, there are special characteristics of individuals working in high-tech fields which create more complex tax situations and excess tax payments. Unfortunately, due to a lack of awareness, many people leave their money in the pockets of the tax authority.

Reasons high-tech workers may be eligible for tax refunds:

There are numerous reasons why you might have paid too much tax. Beyond all the usual reasons, a few examples will illustrate why this is particularly important for high-tech workers.

•  It is very common for high-tech workers to exercise options and stock and in many cases, this leads to paying excess taxes. In some situations, the tax authority determines that exercising options is considered “earned income” as opposed to passive income (exercising options through an exit or in an IPO) and then it is subject to income tax brackets which can reach up to 50%. The tax authority, in many cases, withholds the maximum tax despite the lower marginal tax, based on the assumption that tax coordination will be done at the end of the year.
• Among high-tech workers, there is a high turnover of places of employment often combined with changes in salary level. If, for example, you worked part of the year at a job with a low salary and part of the year at a higher salary, there’s a good chance you are eligible for tax refunds.
• Some high-tech workers complete studies for an academic degree during the period while they’re working, which entitles them to tax credit points. For example, an individual who has completed an academic degree from the year 2014 and onwards is eligible to one credit point over an entire year, or half a credit point for a Master’s degree.

It’s very important to check if you’re owed a tax refund. You’re probably busy and probably imagine running around with a lot of paperwork, but the truth is that the request for a tax refund is actually very simple, especially with us. You can find out now for free if you could be eligible to receive money back from the government. Remember that you can also request a tax refund up to 6 years retroactively (in 2021 for the years 2015-2020).

In most cases, the tax office will handle your request within up to 120 business days from submission.

In some cases, it might take longer than 120 business days. The law requires the tax authority to finish handling your request within one year. Once your request is complete, the refund money is transferred to your bank account.

Is it possible that I might end up owing money instead of receiving a refund?

When you submit on your own, this could absolutely happen! At Anglo Tax Returns, we first calculate precisely the amount of your refund, and only then will we help you make the decision as to whether or not to file.

To check your eligibility for free, click the link >>

Why is this not taken care of by payroll and bank systems?

Payroll systems in Israel always prioritize taking excess tax rather than not enough tax. When is that important? Let’s say that you start working in a new place of employment in March, and we will assume your wages there are ₪10,000 per month. The payroll system will assume that this is your salary also for January and February, so that your annual salary, according to the payroll system, will be ₪120,000, even though, in fact, it is only ₪100,000 (because you actually only worked for 10 months). So how do you receive your money back that the payroll system withheld in excess?

What is the actual process of obtaining a tax refund?

Today, income tax calculators are not connected to any of your personal information (unlike the taxation system in places like Sweden and Denmark, where the tax authority does this on citizens’ behalf). Therefore, the process of receiving a tax refund is actually one of connecting and standardizing the information from external forms (bank and pension fund authorizations, payroll, verification of studies, etc.) within a form from the Tax Authority.

If I worked all year for the same employer, could I still be eligible for a tax refund?

Absolutely! There are lots of reasons why someone who’s worked for a single employer is still owed a refund, for two primary reasons. (1) Information gap – there are things your employer doesn’t know or cannot know, such as income from an apartment rental, stock market investments, life insurance, etc. (2) Time gap – the most common example is a pregnant woman who remains at work until her eighth month. Everyone knows she’s going to give birth in one month, but there is no way to update her employer’s payroll system about the fact that she’s about to give birth (allowing her tax credit points), and about the fact that she’s about to go on leave (and therefore, that her annual income is about to decrease), and a wide variety of reasons more.

I heard that my tax refund comes with interest, is that correct?

Yes, the tax authority takes its debt seriously. If in 2021 you submitted a request for a tax refund for the year 2017, the tax authority would view itself as 4 years behind in paying you this amount. Therefore, it will compensate you with interest of 4% (default arrears interest of the Tax Authority) and also add a linkage amount to cover inflation. This is truly one of the best investment plans out there.

What is Form 106?

Form 106 – Why is it used, when is it available, and why do you need it?

Form 106 is a form used for tax purposes which is issued at the end of a tax year by an employer for every employee.

This form represents a summary of all monthly pay checks issued to an employee by the employer over the course of the entire tax year. This form is used by salaried employees in order to submit an annual tax return so that they can receive a tax refund or simply to report to the Tax Authority in the case of certain salaried employees who are obligated to submit a return. Form 106 contains a balance of withholdings for income tax and Bituach Leumi (National Insurance Institute) and allows you to check your eligibility for a tax refund.

You will receive Form 106 from your employer, according to the law, sometime before the 31st of March in the following tax year (for example, the form for 2020 can be received up until March 31, 2021). Know your rights – your employer is obligated to provide this form and if they do not, they are breaking the law. You may also request that your employer provide you with this form for several years after the fact and they are obligated to provide it.

When you submit a request for a tax refund, tax coordination, or in various claims to Bituach Leumi, you will be required to attach Form 106 as a reference as to various payments which were received at your work, for withholdings made by Bituach Leumi and tax that was withheld from your pay check.

Can I use pay slips instead of Form 106 to calculate my tax refund?

In certain cases, the final pay slip (pay stub, paycheck stub) may reflect payments for an employee made in the previous year, but the income tax authority does not recognize the pay slip and requires attaching Form 106. This is the case also in order to avoid errors.

How will the tax authority know where to send the money?

In the event that you choose to submit your request through us, we will fill out, on the request form to the Tax Authority, the account details you wish you use to transfer the money. Additionally, you will need to attach proof of the account’s existence and ownership (a canceled check or authorization of account details from your bank).