Annual tax return - form 1301 for the self-employed
The annual return is where a whole year of business closes into a single number. Until then you paid advances based on an estimate, and clients may have withheld tax at source. The return works out how much tax you actually owed, and sets that against what has already been paid.
Who has to file
Anyone with an open income tax file, whatever their VAT status. An osek patur files an annual return exactly like an osek murshe, which catches out anyone who reads "exempt" as exempt from reporting. The exemption is from VAT only.
The obligation does not depend on income. A year in which the business did nothing is filed as a zero return, as long as the file is open. Anyone who has stopped trading needs to close the file rather than simply stop filing. A file left open keeps generating reporting duties and national insurance charges.
Salaried employees file only in specific circumstances, such as additional income above a threshold, investment income with no tax withheld at source, or two salaries with no tax coordination.
What form 1301 is, and what goes with it
Form 1301 is the return itself, the declaration of income of an individual and of a business that is not a company. It gathers every income source for the year in one place: the business, a salary if there is one, rental income, investments and the rest.
Alongside it come schedules according to what the file requires. The most common is a profit and loss statement drawn from the books, showing turnover against deductible expenses. Businesses above a certain scale also file a standardized report that lets the Tax Authority read the books in a fixed structure, and that comes from the same Open Format export your system needs to be able to produce.
A self-employed person files online. Paper filing survives only in narrow cases, and most file either through a representative or through the Tax Authority's own system.
The certificates to collect first
- Withholding certificates from every client who withheld, form 806
- Annual confirmation of pension and hishtalmut fund deposits
- Confirmation from Bituach Leumi of contributions actually paid in the tax year
- Receipts for donations to an institution recognized under section 46
- Form 106 from each employer, for anyone also salaried
- Statements of balances and gains from investment accounts, where relevant
- A profit and loss statement from the books, against the turnover reported for VAT
The two most often missing are the withholding certificates and the national insurance confirmation. The first because it comes from someone else who does not always remember to send it, the second because part of national insurance is a deduction and without the confirmation it simply is not counted.
When to file
The statutory date is the end of April in the year after the tax year, and the end of May for anyone required to keep double-entry books. In practice the Tax Authority publishes an extension most years, and representatives receive filing quotas spread across the year.
What that means for you is that the relevant date depends on whether you file yourself or through a representative, and it is worth confirming on that tax year's own page rather than relying on last year's.
Filing late is not only a penalty. It also holds up a refund owed to you, and feeds into the picture behind next year's withholding certificate.
What reduces the bill, and gets missed
Deposits into a pension fund and a hishtalmut fund work in three different ways that are easy to conflate, and the pension and hishtalmut guide separates them. Part of national insurance is a deduction. Personal credit points are counted according to family status, children and other circumstances.
Expenses never recorded during the year almost never make it in afterwards. That is why keeping records as you go is worth more than any April advice, and the annual net calculator gives an advance picture before you sit down with the return itself.
What it costs
There is no single price, because what you are buying is hours. A file with modest turnover, one income source and books kept through the year is a matter of hours. A file with several income sources, a partnership, property, or a year whose paperwork arrives as a pile in February is a matter of days.
Almost all of that difference sits on your side. Orderly books, classified expenses and certificates gathered through the year shorten the accountant's work, and that is what shows up on their invoice. The year-end checklist covers what is worth preparing before the meeting.
How Slate shortens it
Every document and expense from the year sits in one place and leaves in a single export to your accountant, Open Format file included. What is left to gather by hand is only what comes from outside, such as deposit confirmations and client withholding certificates.
This is general information, not tax advice. For a specific situation, talk to an accountant or tax adviser.
Common questions
Who has to file an annual return?
Anyone with an open income tax file, osek patur and osek murshe alike, including in a year with no income. Salaried employees file only in certain circumstances, such as additional income above a threshold or investment income with no tax withheld.
What is form 1301?
The annual return on the income of an individual and of a business that is not a company. It brings together every income source for the year, the expenses, and the tax and advances already paid.
When is it due?
The statutory date is the end of April, and the end of May for anyone required to keep double-entry books. In practice the Tax Authority publishes an extension most years, and representatives get staggered quotas, so it is worth checking the date on that tax year's own page.
Do you file in a year with no income?
Yes, as long as the file is open. An empty year is filed as a zero return. Anyone who has stopped trading needs to close the file rather than simply stop filing.
What goes with the return?
A profit and loss statement from the books, withholding certificates from clients, pension and hishtalmut deposit certificates, confirmation of national insurance paid, receipts for donations to a recognized institution, and form 106 from an employer for anyone also salaried.
What happens after filing?
The tax calculated in the return is set against the advances and against tax withheld at source. Overpayment is refunded, underpayment becomes a balance due carrying linkage and interest.
What does filing cost?
It follows the complexity of the file and how orderly the books are. A business kept in order through the year pays less than one arriving with a box of receipts in February, and that difference is within your control.