Reverse Income Tax

image: 

Dear Friend,

Below is information concerning “Reverse Income Tax”, a grant which is intended to strengthen the status of employees and the self-employed who have a low income. Those who meet the criteria are eligible to receive an income grant from the tax authority directly to their bank account. The amount of the grant is determined by the Knesset and the amount received is dependent upon the income of the individual or his/her spouse, the number of children in the family and the age of the applicant.

It could be that you are eligible for this assistance.

If you would like assistance in checking your eligibility for Reverse Income Tax or filling out the application forms you may turn to your local branch of S.H.I.L. (Citizen’s Advisory Bureau) for assistance at no charge.

Please remember that the application for Reverse Income Tax can only be submitted from January 1, 2012 for the 2011 tax year.

Regards,

Louise Geva
Social Worker – Telfed.

Email: louise@telfed.org.il

Reverse Income Tax

The negative income tax law was enacted by the Tax Authority to strengthen the status of employees and the self-employed who have low income levels. Those who meet the criteria are eligible to receive an income grant from the tax authority directly to their bank account. The amount of the grant is determined by the Knesset and the amount received is dependent upon the income of the individual or his/her spouse, the number of children in the family and the age of the applicant.

Who is eligible for a reverse income tax bonus?
From 2011 the law applies to all employees, self-employed or professionals who have a salary or income from a business or who meet the following conditions:

1. You are an Israeli resident aged 23 years old; you have children (under the age of 19 during the tax year for which the grant is claimed);  you are 55 years old or over and have no children. 

2. During the 2011 tax year, besides the apartment you live in, you, your partner or your children who are financially dependent on you, did not own real estate (an apartment, a store or a plot of land) in Israel or abroad in which you own 50% or more of the assets.

3. If one of the two of the following apply:
• You have one or two children or, or if you are 55 years and have no children and your total earnings from your salary, business or profession in the 2011 tax year exceed  NIS 2,000* but are lower than NIS 5,934*.
• You have three or more children and your total earnings from your salary, business or profession in the 2011 tax year exceed NIS 2,000* and are less than NIS 6,502*.

Under what conditions can one receive reverse income tax?

1. In order to receive the bonus for the 2011 tax year the application must be submitted as detailed below and sent in between January 1, 2012 and September 30, 2012.  

2. If you are self employed or are an employee who is required to file an income tax report or if your partner is required to file an income tax report you must file the claim by May 31, 2012.

3. Your employer must present what is called a 126/856 report for the tax year of 2011 by 30.04.2011.

What are the amounts of the bonus?

Depending on age of the applicant, the number of children in the household and the salary earned: between 20 - 460 Shekels per month

Under which circumstances will the bonus be reduced?
If you or your partner have additional income from a salary, self-employment or professional fees, the amount of the bonus will be reduced according to the additional amount earned.

An additional income is considered as income if it derives from one of the following:
• A stipend that is an income according to item 2(5) of the income tax directive (for example a pension), excluding a disability pension, loss of the ability to work or death of a partner.
• A work injury benefit that is paid by the Bituach Leumi.

How does one receive the bonus?

• If you submit your claim by March 31 2012, you will receive the bonus in four equal payments on the following dates: July 15, 2012, October 15, 2012, January 15, 2013 and April 15, 2013.
• If you submit your claim by June 30, 2012, you will receive the bonus in three equal payments on the following dates: October 15, 2012, January 15, 2012, April 15,2013.
• If you submit your claim by October 30, 2012, you will receive the bonus in two equal payments on the following dates: January 15, 2013 and April 15, 2013.

If you are self employed:
The amount of the bonus will be offset against the tax that you owe for any income you have from any sources, including capital gains in the 2011 tax year. The remaining part of the bonus, which has not been used can be offset during the following tax years (2012, 2013 and 2014).
Should the entire bonus not been offset in the four tax years as stated, payment will be made in the fifth year with a 25% deduction of the remaining sum.

Applications may be submitted in person at selected postal branches throughout Israel after an annual report has been filed with the IRS (Form 1301 – pdf file).  You must bring your Israeli Identity card and a cheque or an official confirmation from the bank that you have a bank account in your name. Remember to note the number of your application form in the order form. This number is needed for further enquiries concerning the form.

Information in Hebrew on applying for a reverse income tax at the post office can be found at:
http://www.israelpost.co.il/postshirut.nsf/misparidE/156?OpenDocument&L=EN

A simulator is available (in Hebrew only) which will help determine your eligibility and the amount you may receive:- http://mahanak.org.il/faq.asp?p=1

 Additional information concerning the negative income tax program can be obtained at : *4954 or 1-222-4954 or 02-5656400 or in Hebrew at: https://www.misim.gov.il/shmhshlili/ .

Note:
• People aged 55 and over with adult children are eligible to apply.
• Each member of a couple may apply separately but they must be earning together less than NIS 11,000 to be eligible.
• If only one of the couple is employed and the other is not, the person who is employed may apply.
• If neither of the couple is employed and they receive a secured income from the Bituach Leumi, they are not eligible to apply.
• If an individual receives more that NIS 4,000 as an allowance from the Bituach Leumi, they are not eligible to apply excluding a disability pension, loss of the ability to work or death of a partner.