OK, I will consent that this is a rare case indeed, and not every employee who mistakenly checks the wrong box on the 101 tax form will be arrested. However, it is important to understand what this form is all about and how to correctly fill it out. The other issue is that purposely filling out incorrect information is not only a criminal offense, but the tax authorities can and will discover your mistake due to a cross-check that they apply with employer’s annual reports.
I will try to explain this in a nutshell: The employee is required by law to fill out a 101 tax form at the start of employment and at the beginning of each tax year (by Feb 28th). Those who fail to do so, or leave blank vital info regarding additional income (via payslip) will be taxed at the max rate (currently 45%) from the first shekel !
The taxes in Israel are annual, thereby enabling a reconfiguration each month, which basically means that in March’s payroll all employees who have not turned in their 101 forms get hit with a mandatory 45% tax on the accumulative salary since January !
The tax authority’s assumption is that when an employee is hit with such a huge amount of taxes, they will run and fill out the 101 form properly. It is also easier for them to make the employer "the bad guy" by deducting the tax.
Know this: section dalet of the form regards your income from this employer and section heh regards your income from other employers. If you have only one employer you need to check the box which states "I have no other source of income". Again I remind you that this is regarding payslip income only ! Any income from rent or stocks or stipends from Social Security are irrelevant on this form.
Do not forget to sign the form – without your signature the form is void and it is as if you didn’t fill out the form.
The case noted in the teaser was from 2003, regarding an employee who worked at 2 jobs simultaneously. At each place of employment he stated that it was his only place of employment and that his wife was not working, although she was. This guy took it a step further, he actually went to the ministry of interior and changed his residence to Nahariya in order to get the 15% tax credit on all income, which he received from both employers !
Well, at year’s end all employers are required to file a report with the tax authorities regarding the annual pay of all of their employees, as well as their personal details and those of there spouses. This info is cross-checked with the employee’s info and when inconsistencies are found they are investigated. The crimes this man committed amounted to 450,000 shekels of tax benefits he wasn’t entitled to. The court awarded him 10 months in prison, a 40,000 shekels fine and if a future repeat happens within 3 years he will return to prison for another several years. Obviously he had to return the tax credits he wasn’t entitled to as well, with interest.
Better to be honest and know how to fill out the form correctly.
This gave him extra tax credit points
Moshe Egel-Tal, CSPP
Founder and CEO, Israpay "making payroll simple"
Site: http://www.israpay.com
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Moshe,
More great advice!
you had mentioned that you were going to be publishing all of this great advice in pamphlet/book form.
I could well imagine this pamphlet reaching into the thousands and thousands with Nefesh b’Nefesh giving them out and employment services and agencies having them available.
You are really creating a “how-to” manual for employees in Israel and you are to be commended on a fine job!
Yoni