Laid Off During the Coronavirus Crisis? You Should Apply for a Tax Refund

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A woman wearing face mask walks past closed shops in Tel Aviv, Oct. 13, 2020.
A woman wearing face mask walks past closed shops in Tel Aviv, Oct. 13, 2020. Credit: AP Photo/Ariel Schalit

Israelis who were laid off during the pandemic and didn’t work a full calendar year may be eligible for a tax refund – but they need to file with the Tax Authority to receive it.

Income taxes are deducted from employee’s paychecks on a monthly basis, based on a forecast of the worker’s annual salary. If the worker’s salary changes drastically during the year – due to unemployment, for instance – the deductions from the first few months of the year may not reflect the person’s actual tax liability.

Israelis typically do not file income tax returns at the end of the year.

People who change jobs midyear, or who are put on unpaid leave and start receiving unemployment pay, may also be eligible for a tax refund.

People in certain industries that have been shuttered since March – such as airlines or entertainment – are eligible for a particularly large refund, as their unemployment pay is significantly less than their regular salary.

Many Israelis are not aware that tax refunds are not automatic, and that they need to take action to receive one. Eligible taxpayers need to submit documents including their annual pay statement, which employers generally release in March or April of the following year, to the Tax Authority. The Tax Authority’s website also contains a simulator to estimate how much of a refund – or a potential tax bill – the individual can expect to receive.

Tax refunds are subject to a statute of limitations, however.

According to a State Comptroller’s Report from 2015, the Tax Authority collected billions in excess taxes from people who worked only part of the year. It collected an excess 563 million shekels ($168 million) in 2012 alone, the report found. The Tax Authority didn’t take any action to return this money, and never informed citizens that it owed them, the report found.

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